Asian Capital - csair.com · Letter from Asian Capital..... 19 5. Appendix I – Financial...

If you are in any doubt as to any aspect of this circular, you should consult a stockbroker or otherregistered dealer in securities, bank manager, solicitor, professional accountant or other professionaladviser.

If you have sold or transferred all your shares of China Southern Airlines Company Limited, youshould at once hand this circular to the purchaser or transferee or to the bank, stockbroker or otheragent through whom the sale was effected for transmission to the purchaser or the transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take noresponsibility for the contents of this circular, make no representation as to its accuracy orcompleteness and expressly disclaim any liability whatsoever for any loss however arising from or inreliance upon the whole or any part of the contents of this circular.

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)(Stock Code: 1055)

(1) PROPOSED RE-ELECTION AND ELECTION OF DIRECTORS ANDSUPERVISORS

(2) MAJOR AND CONNECTED TRANSACTIONAND

CONTINUING CONNECTED TRANSACTIONSFINANCIAL SERVICES FRAMEWORK AGREEMENT

(3) PROPOSED AMENDMENT TO THE ARTICLES OF ASSOCIATIONAND PROCEDURAL RULES

AND(4) NOTICE OF EGM

Independent Financial Adviser to the Independent Board Committeeand the Independent Shareholders

Asian Capital(Corporate Finance) Limited

A notice convening the EGM to be held at 8:30 a.m. on Thursday, 26 December 2013 at No. 1Conference Room, 4/F, Pearl Hotel CSN, No. 5 Road, Southern Work District, Baiyun InternationalAirport, Guangzhou, Guangdong Province, the PRC, a form of proxy for use at the EGM and a replyslip are despatched by the Company together with this circular and are also published on the websitesof the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.csair.com).

If you are not able to attend and/or vote at the general meeting, you are strongly urged to completethe accompanying form of proxy in accordance with the instructions printed thereon and return it tothe Company’s branch share registrar in Hong Kong, Hong Kong Registrars Limited, at 17M Floor,Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any eventnot later than 24 hours before the time appointed for the holding of the general meeting or anyadjournment thereof. Completion and return of the form of proxy will not preclude you from attendingand voting at the meeting or any adjourned meeting should you so wish.

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

11 November 2013

Page

1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

3. Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . 17

4. Letter from Asian Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

5. Appendix I – Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

6. Appendix II – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

7. Appendix III – Profile of Directors Proposed to be Re-elected and Elected . . 42

8. Appendix IV – Profile of Supervisors Proposed to be Re-elected and Elected . 47

9. Appendix V – Proposed Amendment to the Articles of Associationand Procedural Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

10. Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

CONTENTS

– i –

In this circular, the following expressions have the following meanings, unless thecontext requires otherwise:

“A Share(s)” A share(s) of RMB1.00 each in the capital of theCompany

“Announcements” the announcements issued by the Company on 12November 2004, 15 November 2007, 8 November 2010and 16 March 2012 in relation to, among others, thecontinuing connected transactions contemplated underthe financial services agreement dated 12 November2004, the financial services agreement dated 15November 2007, the financial services agreement dated8 November 2010 and the agreement dated 16 March2012 supplemental to the financial services agreementdated 8 November 2010 regarding the revision ofannual cap, respectively

“Articles of Association” the articles of association of the Company, as amendedfrom time to time

“Board” the board of Directors

“Cap(s)” the maximum daily balance of deposits placed by theCompany (including the corresponding interest accruedthereon) on any given day during the life of theFinancial Services Framework Agreement

“CBRC” China Banking Regulatory Commission

“Company” China Southern Airlines Company Limited, a jointstock company incorporated in the PRC with limitedliability

“CSAHC” China Southern Air Holding Company, a state-ownedenterprise established under the laws of the PRC andthe controlling shareholder of the Company

“CSAHC Group” CSAHC and its subsidiaries

“Directors” directors of the Company

DEFINITIONS

– 1 –

“EGM” the second extraordinary general meeting of 2013 ofthe Company to be convened on Thursday, 26December 2013 for, among other things, considering,and, if thought fit, approving the proposed re-electionand election of Directors and Supervisors, FinancialServices Framework Agreement and proposedamendment to the Articles of Association andprocedural rules

“Finance Company” Southern Airlines Group Finance Company Limited, acompany incorporated in the PRC with limited liability

“Financial Services FrameworkAgreement”

the financial services framework agreement dated 8November 2013 entered into between the Parties

“Group” the Company and its existing subsidiaries

“H Share(s)” H share(s) of RMB1.00 each in the capital of theCompany

“Independent Board Committee” the independent committee of the Board, the membersof which consist of the independent non-executiveDirectors, formed to advise the IndependentShareholders with respect to Financial ServicesFramework Agreement and the Caps

“Independent Financial Adviser”or “Asian Capital”

Asian Capital (Corporate Finance) Limited, acorporation licensed to carry out Type 1 (dealing insecurities), Type 4 (advising on securities), Type 6(advising on corporate finance) and Type 9 (assetmanagement) regulated activities under the SFO and isthe independent financial adviser to the IndependentBoard Committee and the Independent Shareholders inrespect of the Provision of Deposit Services and theproposed Cap contemplated under the FinancialServices Framework Agreement

“Independent Shareholders” shareholders of the Company other than CSAHC andits associates

“Latest Practicable Date” 8 November 2013, being the latest practicable dateprior to the printing of this circular for ascertainingcertain information contained herein

“Listing Rules” the Rules Governing the Listing of Securities on theStock Exchange

“Parties” the Company and the Finance Company

DEFINITIONS

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“PBOC” the People’s Bank of China, the central bank of thePRC

“PRC” or “China” the People’s Republic of China (other than, for thepurpose of this circular only, Hong Kong, Macau andTaiwan)

“Provision of Deposit Services” the provision of deposit of money services (includingbut not limited to time deposit, saving deposit) by theFinance Company to the Company pursuant to theFinancial Services Framework Agreement

“Provision of Loan Services” the provision of loan services (including credit lineservices) by the Finance Company to the Companypursuant to the Financial Services FrameworkAgreement

“Share(s)” collectively, the H Shares and A Shares

“Shareholder(s)” shareholder(s) of the Company

“SFO” Securities and Futures Ordinance (Chapter 571 of theLaws of Hong Kong)

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Supervisor(s)” supervisor(s) of the Company

“Supervisory Committee” the supervisory committee of the Company

DEFINITIONS

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Directors:

Non-Executive Directors:Si Xian Min (Chairman of the Board)Wang Quan HuaYuan Xin AnYang Li Hua

Executive DirectorsTan Wan GengZhang Zi FangXu Jie BoLi Shao Bin

Independent Non-Executive Directors:Gong Hua ZhangWei Jin CaiNing Xiang DongLiu Chang Le

Supervisors:Pan Fu (Chairman of the Supervisory Committee)Li Jia ShiZhang WeiYang Yi HuaLiang Zhong Gao

Registered address:278 Ji Chang RoadGuangzhou 510405PRC

11 November 2013

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED RE-ELECTION AND ELECTION OF DIRECTORS ANDSUPERVISORS

(2) MAJOR AND CONNECTED TRANSACTIONAND


(3) PROPOSED AMENDMENT TO THE ARTICLES OF ASSOCIATION ANDPROCEDURAL RULES

AND(4) NOTICE OF EGM

LETTER FROM THE BOARD

– 4 –

1. INTRODUCTION

Reference is made to the announcements of the Company dated 6 November 2013, 7November 2013 and 8 November 2013. The purpose of this circular is, among other things,to provide you with more information in relation to (i) the proposed re-election and electionof Directors and Supervisors; (ii) the Financial Services Framework Agreement; and (iii) theproposed amendment to the Articles of Association and its appendixes (three proceduralrules), to enable you to make an informed decision on whether to vote for or against theresolutions at the EGM.

2. PROPOSED RE-ELECTION AND ELECTION OF DIRECTORS ANDSUPERVISORS

(1) PROPOSED RE-ELECTION AND ELECTION OF DIRECTORS

Due to the term of appointment of each Director of the sixth session of the Boardshall expire upon the conclusion of the EGM, according to the consideration opinionand recommendations of the nomination committee of the Company, the Boardproposed to re-elect each of Mr. Si Xian Min, Mr. Wang Quan Hua, Mr. Yuan Xin Anand Ms. Yang Li Hua as non-executive Directors of the seventh session of the Boardfor a term of three years, to re-elect Mr. Tan Wan Geng, Mr. Zhang Zi Fang, Mr. XuJie Bo and Mr. Li Shao Bin as executive Directors of the seventh session of the Boardfor a term of three years, to re-elect and elect Mr. Wei Jin Cai, Mr. Ning Xiang Dong,Mr. Liu Chang Le and Mr. Tan Jin Song as independent non-executive Directors of theseventh session of the Board for a term of three years. The appointment of Directorsfor the seventh session of the Board shall become effective upon the approval from theShareholders at the EGM.

Mr. Gong Hua Zhang, acting as an independent non-executive Director for theconsecutive six years, will not stand for re-election as independent non-executiveDirector of seventh session of the Board according to the relevant laws and regulations.The term of office of Mr. Gong Hua Zhang shall expire upon the conclusion of theEGM and Mr. Gong Hua Zhang will also resign as the chairman of the auditcommittee, the member of the nomination committee and the member of remunerationand assessment committee of the Company upon the conclusion of the EGM. Mr. GongHua Zhang confirms that there is no disagreement between him and the Company andthere is no matter in relation to his retirement that need to be brought to the attentionof the Shareholders. The Company would like to thank Mr. Gong Hua Zhang for hiscontribution to the success of the Company.

The details of each of the nominated Directors are set out in the Appendix III onpages 42 to 46 of this circular.

(2) PROPOSED RE-ELECTION AND ELECTION OF SUPERVISORS

Due to the term of appointment of each Supervisors of the sixth session of theSupervisory Committee shall expire upon the conclusion of the EGM, according to therecommendation of CSAHC, it is approved to nominate Mr. Pan Fu, Mr. Li Jia Shi and


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Ms. Zhang Wei as Supervisors representing the Shareholders of seventh session of theSupervisory Committee for a term of three years. The appointment of Supervisors forthe seventh session of the Supervisory Committee shall become effective upon theapproval from the Shareholders at the EGM.

The 23rd joint meeting of the third session of employees’ representatives meetingof the Company was held on 7 November 2013 and Ms. Yang Yi Hua and Mr. Wu DeMing were elected as Supervisors representing the employees of seventh session of theSupervisory Committee for a term of three years. The appointment of Supervisorsrepresenting the employees shall become effective upon the conclusion of the EGM.Due to the results of the joint meeting of the employees’ representatives meeting, theterm of office of Mr. Liang Zhong Gao shall expire upon the conclusion of the EGM.Mr. Liang Zhong Gao confirms that there is no disagreement between him and theCompany and there is no matter in relation to his retirement that need to be brought tothe attention of the Shareholders. The Company would like to thank Mr. Liang ZhongGao for his contribution to the success of the Company.

The details of each of the nominated Supervisors and Supervisors representing theemployees are set out in the Appendix IV on pages 47 to 49 of this circular.

3. FINANCIAL SERVICES FRAMEWORK AGREEMENT

(1) FINANCIAL SERVICES FRAMEWORK AGREEMENT

Date

8 November 2013 (after trading hours)

Parties

(a) The Company, its principal business activity of the Company is that of civilaviation.

(b) The Finance Company, a non-wholly-owned subsidiary of CSAHC which isowned as to approximately 66.02% by CSAHC and its wholly-owned subsidiary,33.98% by the Company together with its four subsidiaries. The principal businessactivity of the Finance Company is that of providing financial services, which itis authorised to carry out under the applicable rules and regulations of the PRC.

Subject matter

Pursuant to the Financial Services Framework Agreement, the Finance Companyagreed to provide the following financial services to the Group:


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Provision of Deposit Services

The Finance Company shall accept deposit of money from the Group at interestrates not lower than those set by the PBOC for the same term of deposit. The FinanceCompany will in turn deposit the whole of such sums of money with certainstated-owned commercial banks and listed commercial banks to control the risk. TheFinance Company will ensure the Group is able to use the deposits at any time.

The Company is not subject to any extra charges for depositing money with theFinance Company. The interest rate (such as time deposit rate and saving deposit rate)for the Group’s deposits with the Finance Company shall not be lower than the ratepayable by normal commercial banks in the PRC for comparable deposits (whichever ishigher).

Provision of Loan Services

The Finance Company shall make loans or provide credit line services to theGroup and the entering into of separate loan agreements, which will set out the termsand conditions of the loans, upon application by the Company during the term of theFinancial Services Framework Agreement. The Company will comply with the ListingRules when entering into such separate written agreements. The Finance Company shallnot charge interest rates higher than those set by the PBOC for similar loans. The totalamount of outstanding loans extended by the Finance Company to the CSAHC Group(excluding the Group) must not exceed the sum of the Finance Company’sshareholders’ equity, capital reserves and money deposit received from other parties(except the Group).

The interest rate for loans provided to the Group by the Finance Company shallnot be higher than the basis rate allowed by the PBOC for the same type of loan and,subject to the above, the interest rate charged on the loans to the Group shall be equalto or lower than the rate charged by normal commercial banks in the PRC forcomparable loans (whichever is lower).

The Company will make repayment of principal and payment for interest inaccordance with the payment terms of the separate loan agreements as might be enteredinto between the Parties.

Provision of other financial services

Upon request by the Company, the Finance Company shall also provide otherfinancial services to the Group, including financial and financing consultation, creditcertification and other relevant advice and agency services, insurance agency services,and other businesses which the Finance Company are approved by CBRC to operate byentering into of separate agreements, which will set out the terms and conditions ofsuch services. If the Company is approved to issue bond, the Finance Company canaccept engagement by the Company to provide bond issuance or underwriting services,subject to the entering into of separate agreements. The Company will comply with thereporting, annual review, announcement and independent shareholders’ approval


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requirements of the Listing Rules if the transaction amount of other financial servicescontemplated under the Financial Services Framework Agreement would exceed therelevant threshold when entering into such separate written agreements.

For the other financial services provided by the Finance Company under theFinancial Services Framework Agreement, the fees charged by the Finance Companyfor the provision of other financial services shall be fixed according to the rate of feeschargeable by the PBOC or the CBRC and, subject to the above principle, the feeschargeable shall be equal to or lower than the rate charged by the Finance Companyagainst independent third parties for the same type of financial services.

The Company will make payment for such fees and commissions in accordancewith the payment terms of the separate agreements for other financial services as mightbe entered into between the Parties. In respect of the other financial services to beprovided by the Finance Company to the Group, the Company expects that the totalfees payable by the Group to the Finance Company will not exceed RMB5 million foreach of the three years ending 31 December 2016.

Term of the Financial Services Framework Agreement

The Financial Services Framework Agreement is for a fixed term of three years,commencing from 1 January 2014 to 31 December 2016, subject to the compliancewith the applicable requirements under the Listing Rules and the approval of theIndependent Shareholders being obtained.

Proposed annual Cap

Pursuant to the Financial Services Framework Agreement, unless agreed otherwisebetween the relevant Parties and conditional upon the approval by the IndependentShareholders being obtained, each of the maximum daily balance of deposits (includingthe corresponding interests accrued thereon) placed by the Company as well as themaximum amount of the outstanding loan provided by the Finance Company to theCompany (including the corresponding interests payable accrued thereon) at any timeduring the term of the Financial Services Framework Agreement shall not exceed theCap which is set at RMB6 billion on any given day.

The proposed Cap of RMB 6 billion is determined principally by reference to:

(i) the cash flow position of the Group. The amount of cash and cashequivalents held by the Group as at 30 September 2013 were RMB16,031million (unaudited);

(ii) the revised cap of RMB6 billion for the two years ending 31 December 2013for the Provision of Deposit Services under the agreement dated 16 March2012 supplemental to the financial services agreement dated 8 November2010 (details of which are provided in the Announcements);


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(iii) the maximum historical daily balance of the deposits of the Group with theFinance Company during the two financial years ended 31 December 2012and the nine months ended 30 September 2013 (as provided below); and

(iv) the expectation that the bank and cash balance of the Group shall not haveany substantial changes under a stable operating environment of the Group,so the maximum daily amount of the deposits placed with the FinanceCompany shall maintain at a cap of RMB6 billion.

Historical figures

The historical figures relating to the Provision of Deposit Services, Provision ofLoan Services and provision of other financial services, during the two financial yearsended 31 December 2012 and nine months ended 30 September 2013, were as follows:

Balance of thedeposits

placed withthe Finance

Company asat

Balance of theoutstanding

loans providedby the Finance

Company asat

Depositinterestincome

received fromthe Finance

Company forthe financial

period ended

Loan interestpayable to the

FinanceCompany forthe financial

period ended

Otherfinancial

services feepayable to the

FinanceCompany

RMB(’000,000)

RMB(’000,000)

RMB(’000,000)

RMB(’000,000)

RMB(’000,000)

31 December 2011 2,493 480 32 27 031 December 2012 2,307 426 61 30 030 September 2013 4,374 522 45 20 0

The historical maximum daily balance of the deposits with the Finance Companyplaced by the Group and the historical maximum daily balance of outstanding loansowned by the Group to the Finance Company, during the two financial years ended 31December 2012 and nine months ended 30 September 2013, were as follows:

For the financial yearended

31 December

For the ninemonths ended30 September

2011 2012 2013RMB (’000,000) RMB (’000,000)

Maximum daily amount ofdeposits placed by theGroup 3,952 5,889 5,808

Maximum daily amount ofoutstanding loans owed bythe Group 690 680 526


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The historical maximum daily amount of deposits placed by the Group wasgreater than the historical maximum daily amount of outstanding loans owed by theGroup to the Finance Company because over 95% of the bank loans of the Group aredenominated in US dollars (instead of in RMB), so as to meet the business need (i.e.payment for consideration of aircraft, etc) and facilitate daily financial operation of theGroup. The Group can also take advantage of the continued appreciation of RMBagainst US$ which lower the cost of borrowing of the Group (i.e. income earned isdenominated in RMB, while interest payment is denominated in US$) and enable theGroup to record significant exchange gain as a result of such loan structure. In 2011and 2012, the net exchange gains of the Group are RMB2,755 million and RMB267million, respectively.

The loans provided by the Finance Company to the Group in the past wereunsecured. In future, if the Company provides any guarantee and/or security in respectof any future loans to be provided by the Finance Company to members of the Group,it will comply with the then applicable requirements under the Listing Rules.

Reasons and benefits of the Financial Services Framework Agreement

The main reasons for the election by the Company to continue to use the FinanceCompany for the Provision of Deposits Services are as follows:

� the Finance Company is a non-bank financial company established under theapproval of the PBOC according to the “Administrative Measures forEnterprise Group Finance Companies” and with a financial license issued byCBRC;

� the total amount of outstanding loans extended by the Finance Company tothe CSAHC Group (excluding the Group) must not exceed the sum of theFinance Company’s shareholders’ equity, capital reserves and money depositreceived from other parties (except the Group);

� the pricing policy of the Finance Company and commercial banks in Chinaare subject to guidelines set by the PBOC. Therefore, the fees charged by theFinance Company for its services to the Company is comparable to thosecharged by PRC banks for similar services;

� the Finance Company is regulated by the PBOC and the CBRC and providesits services in accordance with and in satisfaction of the rules andoperational requirements of these regulatory authorities. In addition, thecapital risks are reduced through the introduction of risk control measures;

� the Group usually receives interest on its money deposited with the FinanceCompany at rates which are no less favourable than the rate payable bynormal commercial banks in the PRC for comparable deposits (whichever ishigher). This arrangement allows the Group to achieve a more efficient use


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of its current capital, since the Group can enjoy better interest rates ondepositing its current capital with the Finance Company than the PRCcommercial banks can offer to the Group;

� the Finance Company is a regulated financial institution in the PRC and isentitled to interbank interest rates, which are generally higher than normalcommercial interest rates when re-depositing deposits with commercial banksin the PRC. The Company also holds 21.09% equity interest directly, and12.89% equity interest indirectly through its subsidiaries, in the FinanceCompany. Accordingly, the Company will share the benefit from the FinanceCompany’s profits;

� pursuant to the relevant regulations of the PBOC and the CBRC, thecustomers of the Finance Company are principally limited to entities withinthe CSAHC Group (including the Group), thereby reducing the risks that theFinance Company may otherwise be exposed to if its customers includedother entities unrelated to Group;

� leveraging the Finance Company as the settlement platform, the Companycan strengthen its centralized funds management and shorten the transit timefor fund transfer;

� the Company has appointed director representatives in the Finance Companyto supervise the operation and management and the internal control of theFinance Company. Further, the Finance Company will report to the Companyon a monthly basis regarding the status of the Company’s deposit andre-deposit with other commercial banks made by the Finance Company so asto strengthen the Company’s supervision over its deposit in the FinanceCompany;

� on 31 March 2009, pursuant to the financial services agreement entered intobetween the Company and the Finance Company, CSAHC, as the controllingshareholder of the Finance Company, has undertaken to the Company thefollowing:

� the Finance Company is a duly incorporated enterprise group financecompany under the “Administrative Measures for Enterprise GroupFinance Companies” and the other relevant rules and regulations, whoseprincipal business is to provide finance management services, such asdeposit and financing for the members of the Group; and the relevantcapital flows are kept within the Group;

� the operations of the Finance Company are in compliance with therequirements of the relevant laws and regulations and it is running well,therefore the deposits placed with and loans from the Finance Companyof the Company are definitely secure. In future, the Finance Companywill continue to operate in strict compliance with the requirements ofthe relevant laws and regulations;


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� in respect of the Company’s deposits with and borrowings from theFinance Company, the Company will continue to implement its internalprocedures in accordance with the relevant laws and regulations and theArticles of Association, and CSAHC will not intervene in the relevantdecision-making process of the Company; and

� as the Company is independent from CSAHC in respect of its assets,businesses, personnel, finance and organizational structures, CSAHCwill continue to fully respect the rights of the Company to manage itsown operations, and will not intervene in the daily business operationsof the Company;

� the Board has passed the “The Risk Control System relating to theConnected Transactions between China Southern Airlines Company Limitedand Southern Airlines Group Finance Company Limited” on 28 July 2010(the full text of which has been uploaded on the website of the ShanghaiStock Exchange at www.sse.com.cn)) and carried out connected transactionswith the Finance Company in accordance with this system, so as to ensurethe safety and liquidity of the deposits placed by the Company with theFinance Company.

The Directors are of the opinion that the Provision of Deposit Servicescomptempated under the Financal Services Framework Agreement will not increase theindebtedness of Group and will not have a adverse effect on the sufficiency of theworking capital of the Group.

The Board (including the independent non-executive Directors) considers that theterms of the Financial Services Framework Agreement and the proposed Caps inrespect of the maximum daily balance of deposit (including the corresponding interestsaccrued thereon) are fair and reasonable and are entered into on normal commercialterms, or on terms no less favourable than those available to independent third partiesunder the prevailing local market conditions, in the ordinary and usual course ofbusiness of the Company and in the interests of the Group and its Shareholders as awhole.

Implications under the Listing Rules

The Finance Company is a non-bank finance company established under thedirection of the PBOC with the main business scope of providing various financialservices, including deposit and loan facilities, credit facilities, guarantee, remittance ofmoney and credit references, principally to the CSAHC Group. CSAHC, the controllingshareholder of the Company, directly and indirectly holding approximately 53.12%equity interests in the Company as at the Latest Practicable Date, is a connected personof the Company, The Finance Company is a non-wholly owned subsidiary of CSAHCthus also a connected person of the Company. As the Finance Company is a connectedperson of the Company under the Listing Rules, the Financial Services FrameworkAgreement and the transactions contemplated thereunder constitute continuingconnected transactions of the Company under the Listing Rules.


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As the relevant percentage ratios for the Provision of Deposit Services is higherthan 5% on an annual basis, the Provision of Deposit Services constitutes a non-exemptcontinuing connected transaction under Rule 14A.35 of the Listing Rules and is subjectto the reporting, annual review, announcement and the independent shareholders’approval requirements under Rule 14A.48 of the Listing Rules. Further, the Provisionof Deposit Services constitutes the provision of financial assistance under Rule14.04(1)(e) of the Listing Rules, and as the relevant applicable percentage ratios for theProvision of Deposit Services is higher than 25% but less than 75% on an annual basis,thus the Provision of Deposits Services also constitute a major transaction and isaccordingly subject to the approval by the Shareholders under Chapter 14 of the ListingRules.

The Provision of Loan Services provided by the Finance Company to the Groupwould amount to financial assistance by a connected person for the benefit of theGroup, which are on normal commercial terms similar or even more favourable thanthose offered from independent third parties for comparable services in the PRC andwhich is exempt under Rule 14A.65(4) of the Listing Rules from all reporting, annualreview, announcement and independent shareholders’ approval requirements since nosecurity over the assets of the Group granted in respect of the loan.

In respect of the other financial services to be provided by the Finance Companyto the Group, the Company expects that the total fees payable by the Group to theFinance Company will not exceed RMB5 million for each of the three years ending 31December 2016, which fall within the de minimis threshold set out in the Rule 14A.33of the Listing Rules, therefore the provision of the other financial services by theFinance Company to the Group is exempt from the reporting, annual review,announcement and independent shareholders’ approval requirements of the ListingRules.

Among the 12 Directors, four connected Directors, Mr. Si Xian Min, Mr. WangQuan Hua, Mr. Yuan Xin An and Ms. Yang Li Hua, were required to abstain fromvoting in the Board meeting in respect of resolutions to approve the Financial ServicesFramework Agreement. All remaining eight Directors who were entitled to vote,unanimously approved the above resolutions. The format and procedure for passing theresolution was in compliance with the Company Law of the PRC and the Articles ofAssociation.

CSAHC and its associates, who were directly and indirectly holding an aggregateof 5,214,820,000 Shares (representing approximately 53.12% of the issued share capitalof the Company) as at the Latest Practicable Date, are required to abstain from votingin respect of the proposed resolution to approve the Financial Services FrameworkAgreement in the EGM.

The Company will comply with the Listing Rules when it enters into furtherseparate agreements with the Finance Company in connection with the Provision ofLoan Services and the other financial services by the Finance Company.


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The Financial Services Framework Agreement is also required to be disclosedpursuant to the relevant rules and regulations of the Shanghai Stock Exchange.

(2) INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIALADVISER

The Independent Board Committee comprising all four independent non-executiveDirectors has been formed to consider the Provision of Deposit Services and theproposed Caps contemplated therein so far as the Company and the IndependentShareholders are concerned as a whole. Asian Capital (Corporate Finance) Limited hasbeen appointed as the Independent Financial Adviser to advise the Independent BoardCommittee and the Independent Shareholders on the same.

The Independent Board Committee, having taken into account and based on therecommendation of Asian Capital, considers that the Provision of Deposit Services andthe proposed Caps are on normal commercial terms, in ordinary course of business ofthe Company, fair and reasonable so far as the Company and its IndependentShareholders as a whole are concerned and in the interests of the Company and theShareholders as a whole. Accordingly, the Directors (including the independentnon-executive Directors) recommend all the Independent Shareholders to vote in favourof the resolution to be proposed at the EGM to approve, among others, the FinancialServices Framework Agreement and the proposed Caps.

4. PROPOSED AMENDMENT TO THE ARTICLES OF ASSOCIATION AND ITSAPPENDIXES (THE PROCEDURAL RULES OF THE SHAREHOLDERS’GENERAL MEETING, THE PROCEDURAL RULES OF THE BOARD OFDIRECTORS AND THE PROCEDURAL RULES OF THE SUPERVISORYCOMMITTEE)

A special resolution will be proposed at the EGM to approve the proposed amendmentto the Articles of Association and its appendixes (the Procedural Rules of the Shareholders’General Meeting, the Procedural Rules of the Board of Directors and the Procedural Rulesof the Supervisory Committee) in order to ensure full compliance with the applicable PRClaws and regulations. The amended Articles of Association and its appendixes (theProcedural Rules of the Shareholders’ General Meeting, the Procedural Rules of the Boardof Directors and the Procedural Rules of the Supervisory Committee) are subject toShareholders’ approval at the EGM, and the obtaining of any approval, endorsement orregistration (as applicable) from or with the relevant government authorities in the PRC.

The details of the proposed amendment to the Articles of Association and itsappendixes (the Procedural Rules of the Shareholders’ General Meeting, the ProceduralRules of the Board of Directors and the Procedural Rules of the Supervisory Committee) areset out in the Appendix V on pages 50 to 57 of this circular.


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5. PROSPECTS

In the second half of 2013, the Company will continue to ensure the aviation safetyand gradually to establish the long-term mechanism of safety management. The Companywill pay close attention to the market change in order to firmly grasp business opportunityduring the peak season, make timely adjustment on market strategy and improve theoperational quality. The Company will increase the sense of crisis, strengthen the transitsales, accelerate the service transformation while maintain the strategic transformation. TheCompany shall intensify its effort to promote an effective and comprehensive budgetmanagement. In summary, facing with the severe and complicated operating environment,the Company will strive to achieve the targeted business objectives in 2013 in the secondhalf of the year.

6. EGM

A notice convening the EGM to be held at 8:30 a.m. on Thursday, 26 December 2013at No. 1 Conference Room, 4/F, Pearl Hotel CSN, No. 5 Road, Southern Work District,Baiyun International Airport, Guangzhou, Guangdong Province, the PRC, a form of proxyfor use at the EGM and a reply slip are despatched by the Company together with thiscircular and are also published on the websites of the Stock Exchange(http://www.hkexnews.hk) and the Company (http://www.csair.com).

In order to determine the list of Shareholders who are entitled to attend the EGM, theCompany’s register of members will be closed from Tuesday, 26 November 2013 toThursday, 26 December 2013, both days inclusive, during which period no transfer of HShares will be effected. In order to attend and vote at the EGM, holders of H Shares of theCompany whose transfers have not been registered shall deposit the transfer documentstogether with the relevant share certificates at the H share registrar of the Company, HongKong Registrars Limited, at or before 4:30 p.m. on Monday, 25 November 2013 at Shops1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Whether or not you intend to attend the EGM, you are requested to complete andreturn (i) the reply slip in accordance with the instructions printed thereon not later thanFriday, 6 December 2013 and (ii) the form of proxy enclosed in the notice of EGM inaccordance with the instructions printed thereon not less than 24 hours before the time fixedfor holding the EGM or any adjournment thereof (as the case may be). Completion andreturn of the proxy will not preclude you from attending the EGM and voting in person ifyou so wish.

7. RECOMMENDATION

The Directors believe that all the resolutions proposed for consideration and approvalby the Shareholders at the EGM are in the best interests of the Company and theShareholders as a whole. Accordingly, the Directors recommend that the shareholders of theCompany should vote in favour of the resolutions to be proposed at the EGM as set out inthe notice of EGM.


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8. ADDITIONAL INFORMATION

Your attention is drawn to the letter from the Independent Board Committee as set outon pages 17 to 18 of this circular which contains its recommendation to the IndependentShareholders as to voting at the EGM and to the letter from Asian Capital as set out onpages 19 to 32 of this circular which contains its advice to the Independent BoardCommittee and the Independent Shareholders in relation to the Provision of Deposit Servicesand the proposed Caps.

Your attention is also drawn to the additional information set out in the Appendix tothis circular.

By Order of the BoardSi Xian Min

Chairman


– 16 –

The following is the letter of advice from the Independent Board Committee to theIndependent Shareholders in respect of the Provision of Deposit Services and the proposedCaps, which has been prepared for the purpose of inclusion in this circular.


11 November 2013

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTIONAND


INTRODUCTION

We refer to a circular (the “Circular”) of the Company dated 11 November 2013 ofwhich this letter forms part. Terms used in this letter shall have the same meaning asdefined in the Circular unless the context otherwise requires.

We have been appointed by the Board as the Independent Board Committee to adviseyou whether the Provision of Deposit Services and the proposed Caps contemplated underthe Financial Services Framework Agreement are on normal commercial terms, in ordinaryand usual course of business of the Company, fair and reasonable as far as the Company andthe Independent Shareholders are concerned and in the interests of the Company and theShareholders as a whole. Asian Capital (Corporate Finance) Limited has been appointed asthe Independent Financial Adviser to advise us and the Independent Shareholders in thisregard.

We wish to draw your attention to the letter from the Board as set out on pages 4 to 16of the Circular and the letter from Asian Capital as set out on pages 19 to 32 of theCircular, which contains, inter alia, its advice and recommendation regarding the terms ofthe Financial Services Framework Agreement with the principal factors and reasons for itsadvice and recommendation.

RECOMMENDATION

Taking into account the advice and recommendation of Asian Capital, we are of theview that the terms of the Provision of Deposit Services and the proposed Capscontemplated under the Financial Services Framework Agreement are on normal commercial

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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terms, in ordinary course of business of the Company, fair and reasonable so far as theCompany and its Independent Shareholders are concerned and in the interests of theCompany and its Shareholders as a whole. Accordingly, we recommend the IndependentShareholders to vote in favour of the proposed resolution to approve the Financial ServicesFramework Agreement and the proposed Caps contemplated thereunder at the EGM.

Yours faithfully,For and on behalf of

the Independent Board Committee ofCHINA SOUTHERN AIRLINES COMPANY LIMITED

Gong Hua Zhang Wei Jin Cai Ning Xiang Dong Liu Chang LeIndependent Non-executive Directors

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

– 18 –

The following is the full text of the letter from Asian Capital (Corporate Finance)Limited to the Independent Board Committee and the Independent Shareholders, which hasbeen prepared for the purpose of inclusion in this circular.

Asian Capital(Corporate Finance) Limited

To the Independent Board Committee and the Independent Shareholders

11 November 2013

Dear Sirs or Madam,

MAJOR AND CONNECTED TRANSACTIONAND

CONTINUING CONNECTED TRANSACTIONS(FINANCIAL SERVICES FRAMEWORK AGREEMENT)

INTRODUCTION

We refer to our engagement as the independent financial adviser to the IndependentBoard Committee and the Independent Shareholders to advise whether the terms of theProvision of Deposit Services contemplated under the Financial Services FrameworkAgreement dated 8 November 2013 between the Company and the Finance Company are onnormal commercial terms, are fair and reasonable and are in the interests of the Companyand the Shareholders as a whole. Relevant details of the transaction are set out in thecircular of the Company dated 11 November 2013 (the “Circular”), of which this letterforms part. Terms used in this letter shall have the same meanings as those defined in theCircular unless the context indicates otherwise.

Since the provision of financial services contemplated under the financial servicesagreement dated 8 November 2010 will expire on 31 December 2013, the Company and theFinance Company entered into the Financial Services Framework Agreement on 8 November2013, pursuant to which the Group agreed to renew and extend the term of the provision offinancial services by the Finance Company, including (i) the Provision of Deposit Services;(ii) the Provision of Loan Services; and (iii) other financial services, with a fixed term ofanother three years commencing from 1 January 2014 to 31 December 2016, subject to thecompliance with the applicable requirements under the Listing Rules and the approval of theIndependent Shareholders at the EGM.

CSAHC is the controlling shareholder of the Company and directly and indirectly holdsapproximately an aggregate of 53.12% equity interests in the Company, and is, therefore, aconnected person of the Company. The Finance Company is a non-wholly owned subsidiaryof CSAHC thus also a connected person of the Company. Therefore, the Financial ServicesFramework Agreement and the transactions contemplated thereunder constitute continuingconnected transactions of the Company under Chapter 14A of the Listing Rules.

LETTER FROM ASIAN CAPITAL

– 19 –

As one or more of the percentage ratios of the maximum daily balance of depositsunder the Provision of Deposit Services exceed 5%, the Provision of Deposit Servicesconstitutes a non-exempt continuing connected transaction of the Company and the Provisionof Deposit Services, together with the respective Cap, is subject to the reporting,announcement and the Independent Shareholders’ approval requirements. In addition, theProvision of Deposit Services contemplated under the Financial Services FrameworkAgreement also constitutes the provision of financial assistance under Rule 14.04(1)(e) ofthe Listing Rules and as one or more of the percentage ratios of the maximum daily balanceof deposits under the Provision of Deposit Services exceed 25% but is lower than 75%, theProvision of Deposit Services also constitutes a major transaction which is subject torelevant reporting, announcement and the Shareholders’ approval requirements under Chapter14 of the Listing Rules. Based on the information available to us, other transactions underthe Financial Services Framework Agreement do not constitute non-exempt continuingconnected transaction of the Company.

The EGM will be convened on 26 December 2013 to approve the Financial ServicesFramework Agreement and the transactions contemplated therein. CSAHC and its associatesare required to abstain from voting in respect of the proposed ordinary resolutions onapproving the Provision of Deposit Services contemplated under the Financial ServicesFramework Agreement at the EGM.

The Independent Board Committee comprising all the Company’s independentnon-executive Directors, namely Gong Hua Zhang, Wei Jin Cai, Ning Xiang Dong and LiuChang Le, has been formed to advise the Independent Shareholders whether the terms of theProvision of Deposit Services are on normal commercial terms, are fair and reasonable andare in the interests of the Company and the Shareholders as a whole.

We are not connected with the Company or any substantial shareholders of theCompany or any person acting or deemed to be acting in concert with any of them andaccordingly, are considered eligible to give independent advice on the Provision of DepositServices and the respective Cap. Apart from a normal professional fee payable to us inconnection with this appointment, no arrangements exist whereby we will receive any feesor benefits from the Company or any of its substantial Shareholders or any person acting ordeemed to be acting in concert with any of them.

BASIS OF OUR OPINION

In forming our opinion and recommendation in relation to the Provision of DepositServices and the respective Cap, we have considered, among other matters, informationcontained in (i) the Company’s annual reports 2011 and 2012 and interim report 2013; (ii)the Finance Company’s annual report 2012 and its unaudited management accounts for theperiod ended 30 June 2013; (iii) the Company’s circulars dated 19 November 2010 and 13April 2012; (iv) the Financial Services Framework Agreement; and (v) the Circular. We havealso relied on the information, statements and representations supplied, and the opinionexpressed, by the Directors and the management of the Company. We consider that we havereviewed sufficient relevant information and documents and have taken reasonable steps asspecified under Rule 13.80 of the Listing Rules (including its notes) to reach an informedview and to make our recommendation on a reasonable basis. We relied on information


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provided and statement and opinion made by the Company, its Directors, advisors andrepresentatives, for which they takes full responsibilities. We assumed that all relevantinformation and statements are true, accurate and complete at the time they were given ormade and continue to be so as at the date of the Circular. We also assumed that all views,opinions and statements of intention provided by the Directors, advisors and representativesof the Company have been arrived at after due and careful enquiries. The Companyconfirmed that there are no other material facts not contained in information provided to usthe omission of which would make any statement or opinion contained in the Circularmisleading.

We have no reason to suspect that any material facts or information have been omittedor withheld from the information or opinion provided to us by the Company, its Directors,advisors or representatives, or to doubt the truth, accuracy or completeness of theinformation and representations or reasonableness of the opinion provided to us by them. Wehave not, however, conducted any independent verification on the information provided to usby the Company, its Directors, advisors or representatives, nor have we conducted anyindependent investigation into the business and affairs or the prospects of the Group. Wetherefore do not guarantee the accuracy or completeness of any of such information.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion to the Independent Board Committee and the IndependentShareholders in respect of the Provision of Deposit Services contemplated under theFinancial Services Framework Agreement, we have considered the following principalfactors:

1. Principal terms of the Provision of Deposit Services

On 8 November 2013, the Company and the Finance Company entered into theFinancial Services Framework Agreement, pursuant to which the Group agreed to renew andextend the term of the provision of financial services by the Finance Company, including (i)the Provision of Deposit Services; (ii) the Provision of Loan Services; and (iii) otherfinancial services, with a fixed term of another three years commencing from 1 January2014 to 31 December 2016, subject to the compliance with the applicable requirementsunder the Listing Rules and the approval of the Independent Shareholders at the EGM.

Pursuant to the terms of the Provision of Deposit Services contemplated under theFinancial Services Framework Agreement, the Group can deposit its money to and withdrawits money from the Finance Company on a voluntary basis from time to time while theFinance Company shall accept deposits from the Group and provide interest on the moneydeposited by the Group at interest rates not lower than the standard rates set by the PBOC.The Cap, which refers to the maximum daily balance of deposit (including the interestaccrued) that can be placed by the Group with the Finance Company on any given dayduring the term of the Financial Services Framework Agreement, is set at RMB6 billion.


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2. Background of the Group

The Group is principally engaged in the operation of civil aviation, including theprovision of passenger, cargo, mail delivery and other extended transportation services. TheCompany is one of the largest airlines companies in the PRC. According to the interimreport of the Company for the period ended 30 June 2013, the Company owned a total of525 aircrafts, in which 260 were Boeing, 239 were Airbus and 26 were other aircrafts. Thefleet size of the Group is ranked the first in Asia and the fifth among 240 airline membersof International Air Transport Association in 2012. In 2013, the Group provides flightservices to 193 destinations in 35 countries and regions across the world. As stated in theannual report of the Company for the year ended 31 December 2012, the number ofpassengers carried and cargo and mail traffic volume of the Group achieved 86.5 million and1.2 million tonnes respectively during the year.

Extract of financial information of the Group

The following table summarized the cash and cash equivalents and total assets of theGroup as at 31 December 2010, 2011 and 2012 and 30 June 2013 extracted from therespective annual and interim reports of the Group. The cash and cash equivalents of theGroup represented approximately 9.3%, 7.6%, 7.1% and 6.2% of its total assets as at 31December 2010, 2011 and 2012 and 30 June 2013 respectively.

As at 31 DecemberAs at

30 June2010 2011 2012 2013RMB

millionRMB

millionRMB

millionRMB

million(audited) (audited) (audited) (unaudited)

Cash and cash equivalents (a) 10,404 9,863 10,082 9,412

Total assets (b) 111,335 129,412 142,454 150,905

Cash and cash equivalents/Totalassets

(a)/(b) 9.3% 7.6% 7.1% 6.2%

According to the above table, the cash and cash equivalents are material assets to theGroup and have a substantial impact on the financial position and performance of the Group.We consider it necessary for the Group to seek an appropriate platform to utilize its idleliquidity effectively. The Provision of Deposit Services contemplated under the FinancialServices Framework Agreement provides an option for the Group to achieve better treasurymanagement.

3. Background of the Finance Company

The Finance Company is a non-wholly owned subsidiary of CSAHC and is owned as toapproximately 66.02% by CSAHC and its wholly-owned subsidiary, and 33.98% by theCompany together with four of its non-wholly owned subsidiaries. The Finance Company is


– 22 –

a non-bank financial institution established in 1995 under the laws of the PRC withregistered capital of approximately RMB724 million. The shareholding structure of theFinance Company is as follows:

CSAHC

100%

53.12%

51%-60%

12.889%

21.089%

0.505%

65.517%

the Finance Company

A wholly-ownedsubsidiary of

CSAHC

Four non-whollyowned subsidiaries

of the Company

the Company

Regulatory environment of the Finance Company

As a licensed non-bank financial institution in the PRC, the Finance Company issupervised by the CBRC under the Administrative Measures for Enterprise Group FinanceCompanies (the “Administrative Measures”, 企業集團財務公司管理辦法). With reference tothe Approval in relation to the New Business Scope of Southern Airlines Group FinanceCompany Limited by the CBRC（中國銀監會關於批准中國南航集團財務有限公司新增業務範圍的批覆）, the scope of business of the Finance Company includes: (i) arrangement of financialand financing advisory, credit authentication and relevant consulting and agency services formember companies; (ii) assistance in collection and payment of transaction money formember companies; (iii) the approved insurance agency business; (iv) provision ofguarantees for member companies; (v) entrusted loan and entrusted investment servicesamong member companies; (vi) bills discounting and acceptance for member companies;(vii) money transfer and settlement and design of relevant settlement and clearance structureamong member companies; (viii) acceptance of money deposit from member companies; (ix)arrangement of lending and finance lease for member companies; (x) interbank markettransactions; (xi) issue of approved bonds of the Finance Company; (xii) underwriting bondsof member companies; (xiii) investment in financial institutions; and (xiv) investment inmarketable securities. The Provision of Deposit Services is part of the scope of business ofthe Finance Company.


– 23 –

The Finance Company is subjected to the supervision of the PBOC and the CBRC.Pursuant to the Administrative Measures, the Finance Company is required to submit auditedfinancial statements and report its operation status to the CBRC annually. In addition, theFinance Company must comply with certain financial ratio requirements set by the CBRCfrom time to time.

The below table set out the financial ratio requirements of the CBRC with reference tothe Administrative Measures and respective financial ratios of the Finance Company as at 31December 2011, 31 December 2012 and 30 September 2013:

Financial ratioRequirements of theCBRC

Financial ratio of the Finance Companyas at

31 December2011

as at31 December

2012

as at30 September

2013

Capital adequacy ratio Not less than 10% 29.52% 25.20% 24.43%

Inter-bank borrowing balancesto total capital

Not more than 100% 73.67% 85.19% 76.15%

Total amount of outstandingguarantees to total capital

Not more than 100% 0.00% 1.42% 0.58%

Total amount of investment tototal capital ratio

Not more than 70% 35.93% 61.33% 67.37%

Self-owned fixed assets to totalequity ratio

Not more than 20% 0.38% 0.25% 0.17%

As shown in the table above, the Finance Company complied with all the financialratio requirements of the CBRC as at 31 December 2011, 31 December 2012 and 30September 2013. We have been advised by the Directors that to their best knowledge, up tothe Latest Practicable Date, there is no record of non-compliance with relevant laws, rulesand regulations of the PRC on the Finance Company.

Organization structure of the Finance Company

According to the audited annual report of the Finance Company for the year ended 31December 2012, the Finance Company has a well-developed organization structure. It hasestablished a board of directors with a supervisory committee, a strategy managementcommittee, a risk management committee, a credit review committee and an investmentcommittee. Below the board and the committees, there are ten functional departmentsallocated with different responsibilities. We consider the Finance Company has acomprehensive organization structure to provide and monitor the Provision of DepositServices to the Group.


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Financial performance of the Finance Company

The table below sets out the financial performance of the Finance Company extractedfrom its audited financial statements for the years ended 31 December 2011 and 2012 and itsunaudited management accounts for the period ended 30 June 2013.

For the year ended31 December

For theperiodended

30 June2011 2012 2013

RMB million RMB million RMB million(audited) (audited) (unaudited)

Revenue 108 155 133Profit before tax 74 118 65Profit after tax 61 92 49

According to the Administrative Measures, the Finance Company has to suspend partof its operation in the event it incurs a loss more than 30% of its registered capital in a yearor incur a loss more than 10% of its registered capital for three consecutive years. Since theFinance Company achieved a profit after tax of approximately RMB61 million, RMB92million and RMB49 million for the years ended 31 December 2011 and 2012 and for theperiod ended 30 June 2013 respectively, there is no indication that the operation of theFinance Company will be suspended.

Having reviewed the regulatory environment, organization structure and financialperformance of the Finance Company, we have no reason to doubt the legitimacy andeligibility of the Finance Company for the Provision of Deposit Services to the Group fromthe aforementioned information provided by the Company.

4. Reasons for and benefits of the Provision of Deposit Services under the FinancialServices Framework Agreement

In considering whether the terms of the Provision of Deposit Services are on normalcommercial terms and are fair and reasonable, we have also taken into account the reasonsfor and benefits of the Provision of Deposit Services as set out in the Letter from the Boardcontained in the Circular.

(i) Pricing policy

In determining the interest rate on deposits, the financial institutions in the PRChave to follow the guidelines and the benchmark rates on deposits set by the PBOCwhich may change from time to time.


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By entering into the Financial Services Framework Agreement, the Group canreceive interest on its money deposited with the Finance Company at rates no lessfavorable than the benchmark rates on deposits set by the PBOC. It is the view of theBoard that this arrangement allows the Group to achieve a more efficient use of itscapital.

We have reviewed the benchmark rates on deposits announced by the PBOC since2010. Before June 2012, the PBOC has adopted a fixed rate policy on the benchmarkrates on deposits which all the financial institutions in the PRC should follow. Asadvised by the Company, the Finance Company has provided the benchmark rates setby the PBOC on the money deposited by the Group which was the same as the otherPRC commercial banks.

On 7 June 2012, the PBOC announced to reduce the benchmark rate on depositsbut introduced an upper floating-range limit on the benchmark rates on deposits. Theinitial upper floating-rate limit was set at 1.1 times of the benchmark rates on deposits.As advised by the Company, the Finance Company immediately increased the depositinterest rates on the money deposited by the Group on 1 July 2012 to 1.1 times of thebenchmark rates on deposits, which was the maximum interest rate that the licensedfinancial institutions in the PRC could offer under the guideline of the PBOC.

Having reviewed and considered (i) the Administrative Measures; (ii) the terms ofthe Provision of Deposit Services under the Financial Service Agreement; (iii) thebenchmark rates on deposits set by the PBOC since 2010; and (iv) the deposits interestrate policy offered by the Finance Company to the Group since 2010 to the LatestPracticable Date, we concur with the view of the Board that the terms of the depositinterest rates, as part of the terms contemplated under the Financial ServicesFramework Agreement, are on normal commercial terms, fair and reasonable and are inthe interest of the Company and the Shareholders as a whole.

(ii) Long and stable relationship

The Finance Company has a well-established relationship with the Group. Asadvised by the Board, the Group has been using the financial services provided by theFinance Company since 1996. It is expected that both parties have a betterunderstanding on the operations of each other from their previous co-operations thatshould enhance efficiency and effectiveness of the Provision of Deposit Services by theFinance Company and better quality of services can be delivered accordingly.

(iii) Share of profits from the Finance Company

As mentioned in above paragraph headed “Background of the Finance Company”,the Company and four of its non-wholly owned subsidiaries together owned 33.98% ofthe equity interest in the Finance Company. According to the annual report of theCompany for the year ended 31 December 2012, the investment of the Group in theFinance Company was classified as an investment in associates which was accountedfor in the consolidated financial statements of the Company using the equity method ofaccounting. The Company has been recognizing its share of results of the Finance


– 26 –

Company in the consolidated income statement of the Group. As such, we concur withthe Board’s view that the Company will share the benefit from the Finance Company’sresults.

(iv) Thorough internal control measures

The Group has applied thorough internal control measures in utilizing theProvision of Deposit Services provided by the Finance Company to secure theShareholders’ interest.

Pursuant to the Financial Services Framework Agreement, the Finance Companyundertakes that the deposits placed by the Group will in turn be re-deposited withcertain stated-owned or listed commercial banks. As advised by the management of theCompany, the Finance Company reports to the Company on a monthly basis regardingthe status of the Company’s deposit and the re-deposit of the Finance Company withother stated-owned or listed commercial banks. These measures allow the Company toclosely monitor the status of its deposits placed with the Finance Company.

As stated in the Letter from the Board contained in the Circular, the Company hasappointed representatives to the board of the Finance Company to supervise theoperation and management of the Finance Company, as well as its internal controlenvironment. According to the information provided by the Company regarding theboard members of the Finance Company, two of the five existing directors of theFinance Company were appointed by the Group to monitor the business and theoperation of the Finance Company.

With reference to the Administrative Measures, the customers of the FinanceCompany are limited to its member companies only (including the Group). Thisguideline reduces the business risk that the Finance Company may otherwise beexposed to if its customers include entities other than its member companies.

The Company and the Finance Company has adopted the Risk Control Systemrelating to the Connected Transactions between China Southern Airlines CompanyLimited and Southern Airlines Group Finance Company Limited (the “Risk ControlSystem”), which was passed by the Board on 28 July 2010, to regulate any connectedtransactions entered into between the Company and the Finance Company.

Pursuant to the Risk Control System, the Company shall:

� request the Finance Company to report its compliance status on the financialratio requirements of the CBRC under the Administrative Measures on aquarterly basis. In the event the Finance Company fails to comply with anyof the financial ratio requirements, the Group should stop placing in depositsin the Finance Company;

� obtain the financial statements of the Finance Company on a timely basis;


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� perform risk assessment on the deposits placed with the Finance Companyand disclose the risk assessment result in the interim and annual reports ofthe Company; and

� withdraw the deposits placed with the Finance Company occasionally toascertain the safety and liquidity of the deposits.

Since the Provision of Deposit Services constitutes a non-exempt continuingconnected transaction of the Company, the Company is also subject to annual reviewrequirement of continuing connected transactions as required under Rule 14A.37 toRule 14A.40 of the Listing Rules.

Pursuant to Rule 14A.37 of the Listing Rules, the independent non-executiveDirectors must review the continuing connected transactions annually and confirm inthe annual report of the Company that the transactions have been entered into theordinary and usual course of business, on normal commercial terms and are fair andreasonable and in the interests of the Shareholders as a whole. In particular, Rule14A.38 of the Listing Rules also requires the auditors of the Company to provide aletter to the Board and the Stock Exchange annually confirming the continuingconnected transactions are carried out in accordance with the terms of the agreementapproved including the pricing policies and the caps.

We have been confirmed by the Directors that the Group has applied the internalcontrol procedures under the Risk Control System properly and has complied with theannual review requirement as required under Rule 14A.37 to Rule 14A.40 of theListing Rules.

The aforementioned internal control measures strictly monitor the Provision ofDeposit Services between the Finance Company and the Group. If these internal controlmeasures are properly applied, we believe these measures can safeguard the credit riskand also enhance the safety and liquidity of the deposits placed by the Group with theFinance Company.

5. Proposed Cap for the Provision of Deposit Services

Pursuant to the Financial Services Framework Agreement, the proposed Cap, whichrefers to the maximum daily balance of deposit (including the interest accrued) that can beplaced by the Group with the Finance Company on any given day during the term of theFinancial Services Framework Agreement, is maintained at RMB6 billion. As stated in theLetter from the Board contained in the Circular, the proposed Cap was determined by themanagement of the Company with reference to (i) the cash position of the Group; (ii) thehistorical Caps; (iii) the maximum historical daily balance of deposits of the Group with theFinance Company; and (iv) the expectation that the bank and cash balance of the Groupshall not have any substantial changes.


– 28 –

The following table summarized relevant financial information extracted from theaudited financial statements of the Group for the years ended 31 December 2011 and 2012and the unaudited financial information provided by the Group for the period ended 30September 2013:

As at 31 DecemberAs at

30 September2011 2012 2013


Cash and cash equivalents 9,863 10,082 16,031Deposits placed with the Finance

Company 2,493 2,307 4,374Historical Caps 4,000 6,000 6,000


For the ninemonthsperiodended

30 September2011 2012 2013


Net cash flow from operating activities 12,557 11,704 11,134

Based on the information provided by the Company, the table set out belowsummarized (i) the historical maximum and average amount of deposits placed by the Groupwith the Finance Company; and (ii) the historical maximum and average daily utilization ofhistorical Caps, during the years ended 31 December 2011 and 2012 and the nine monthsperiod ended 30 September 2013.


– 29 –


For the ninemonthsperiodended

30 September2011 2012 2013


Maximum balance of deposits placedwith the Finance Company by theGroup (including accrued interest) 3,952 5,889 5,808

Maximum daily utilization of historicalCaps (Note 1) 98.80% 98.15% 96.80%

Average balance of deposits placed withthe Finance Company by the Group(including accrued interest) (Note 2) 1,718 2,252 2,686

Average daily utilization of historicalCaps (Note 3) 42.95% 37.53% 44.77%

Notes:

1. The maximum daily utilization of historical Cap is calculated by dividing the maximum balance ofdeposits placed with the Finance Company by the Group by the historical Cap at the respectiveyear-end or period-end date.

2. Average daily balance of deposits placed with the Finance Company by the Group is simply theaverage balance of deposits placed with the Finance Company by the Group at the quarter-end datesduring the respective year or period.

3. The average daily utilization of historical Cap is calculated by dividing the average balance ofdeposits placed with the Finance Company by the Group by the historical Cap at the respective

year-end or period-end date.

With reference to the aforementioned basis advised by the Board in determiningthe Cap, we have taken into account the following factors in assessing thereasonableness of the proposed Cap:

(i) Historical Caps

The Cap has been revised from RMB4 billion to RMB6 billion under theagreement dated 16 March 2012 supplemental to the financial services agreement dated8 November 2010, representing an increase of 50% on the Cap.

(ii) Cash positions of the Group

As illustrated in the table above, the cash and cash equivalents of the Group wereapproximately RMB9,863 million and RMB10,082 million as at 31 December 2011 and2012 respectively. For the years ended 31 December 2011 and 2012, the Group’s netcash flow from operating activities remained at approximately RMB12,557 million andRMB11,704 million respectively with no significant fluctuation.


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Although the Group’s cash and cash equivalents as at 30 September 2013 and netcash flow from operating activities for the nine months period ended 30 September2013 increased substantially to approximately RMB16,031 million and RMB11,134million respectively, the increase was mainly due to the effect of seasonal boomingduring the peak season from July to September only as advised by the management ofthe Company.

Since the management of the Group expect the Group would be operated in astable environment in the coming three years ending 31 December 2016 and its cashand cash equivalents shall not have any substantial changes, taking into account thestable cash and cash equivalents and net cash flow from operating activities since theyear ended 31 December 2011, the proposed Cap is in line with the businessdevelopment and cash flow requirement of the Group.

(iii) Daily utilization of the historical Caps

In fact, the Group’s average daily utilization of the historical Caps remained atbelow 50% only for the years ended 31 December 2011 and 2012 and the nine monthsended 30 September 2013 as illustrated in the table above. However, as advised by theGroup, the revenue and the cash inflow of the Group normally increases sharply duringpeak season due to the seasonal booming mentioned above. During the years ended 31December 2011 and 2012 and the nine months period ended 30 September 2013, theGroup’s maximum daily balance of deposits placed with the Finance Company hasreached approximately 98.80%, 98.15% and 96.80% of the historical Caps.

It is the expectation of the management of the Group that in the coming threeyears ending 31 December 2016, the operating environment of the Group will remainstable and accordingly, the Group’s average and maximum daily balance of depositswill be maintained at a similar level.

Having taken into account (i) the Group’s average daily utilization of thehistorical Caps; (ii) the Group’s maximum daily utilization of the historical Caps; (iii)the Group’s expectation on its operating environment, the proposed Cap will besufficient but not excessive to the Group and is at a reasonable level to fulfill theGroup’s needs of fund management.

Having reviewed and analyzed all the relevant historical data of the Group andtaking into account the above factors, we concur with the Director’s view that theproposed Cap pursuant to the Financial Services Framework Agreement are fair andreasonable so far as the Independent Shareholders are concerned.

RECOMMENDATIONS

Having considered the above principal factors and reasons, we concur with theDirectors’ view that the Provision of Deposit Services including the Cap contemplated underthe Financial Services Framework Agreement are on normal commercial terms, are fair andreasonable so far as the Independent Shareholders are concerned and are in the interests ofthe Company and the Shareholders as a whole. Accordingly, we advise the Independent


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Board Committee to recommend the Independent Shareholders, and we also recommend theIndependent Shareholders, to vote in favour of relevant resolutions in relation to theProvision of Deposit Services and the respective Cap contemplated under the FinancialServices Framework Agreement to be proposed at the EGM.

Yours faithfully,For and on behalf of

Asian Capital (Corporate Finance) LimitedLarry Chan

Executive Director


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1. FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for each of the three years ended 31 December2012, 2011 and 2010 and the six months ended 30 June 2013 are disclosed in the followingdocuments which have been published on the websites of the Stock Exchange(http://www.hkexnews.hk) and the Company (http://www.csair.com):

� annual report of the Company for the year ended 31 December 2012 published on24 April 2013 (pages 61-179)

� annual report of the Company for the year ended 31 December 2011 published on12 April 2012 (pages 56-173);

� annual report of the Company for the year ended 31 December 2010 published on12 April 2011 (pages 45-137); and

� interim report of the Company for the six months ended 30 June 2013 publishedon 3 September 2013 (pages 14-45).

2. INDEBTEDNESS AND WORKING CAPITAL

The Company has obtained a waiver from the Stock Exchange from strict compliancewith the requirements under Rule 14.66(10) of the Listing Rules to disclose the informationin relation to the statement of indebtedness and the sufficiency of working capital statementunder paragraphs 28 and 30, respectively of Appendix 1B to the Listing Rules. TheDirectors are of the view that Provision of Deposit Services contemplated under theFinancial Services Framework Agreement will not have a material adverse effect on theliabilities and working capital of the Group.

3. EFFECT

As the Provision of Deposit Services will enable the Group to receive interest on itsmoney deposited with the Finance Company at rates which are no less favourable than therate payable by normal commercial banks in the PRC for comparable deposits (whichever ishigher) and the Finance Company will ensure the Group is able to use the deposits at anytime, it is not expected to have any substantial impact on the Group’s cash-flow position orits business operations. Furthermore, the Provision of Deposit Services will not add anyfinancial burden to the Group. Therefore, the Provision of Deposit Services is not expectedto result in any material impact on the earnings, assets and liabilities of the Group.

APPENDIX I FINANCIAL INFORMATION

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1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept fullresponsibility, includes particulars given in compliance with the Listing Rules for thepurpose of giving information with regard to the Group. The Directors having made allreasonable inquiries, confirm that to the best of their knowledge and belief the informationcontained in this circular is accurate and complete in all material respects and notmisleading or deceptive, and there are no other matters the omission of which would makeany statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS OF DIRECTORS AND SUPERVISORS

As at the Latest Practicable Date, none of the Directors, chief executive or supervisorsof the Company and their respective associates had interests or short positions in the shares,underlying shares and/or debentures (as the case may be) of the Company or its associatedcorporations (within the meaning of Part XV of the SFO) which were notified to theCompany and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of SFO(including interests or short positions which are taken or deemed to have under suchprovisions of the SFO), or recorded in the register maintained by the Company pursuant toSection 352 of the SFO or which were notified to the Company and the Stock Exchangepursuant to the Model Code for Securities Transactions by Directors of the Listed Issuers inAppendix 10 of the Listing Rules. None of the Directors, chief executive or supervisors ofthe Company and their respective associates (as defined in the Listing Rules) has anycompeting interests which would be required to be disclosed under Rule 8.10 of the ListingRules if each of them were a controlling shareholder of the Company.

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as was known to the Directors, chief executiveand Supervisors of the Company, the interests and short positions of the following personsother than the Directors, chief executive or supervisors of the Company in the Shares andunderlying Shares which would fall to be disclosed to the Company under the provisions ofDivisions 2 and 3 of Part XV of the SFO or who were, directly or indirectly, interested in

APPENDIX II GENERAL INFORMATION

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10% or more of the nominal value of any class of share capital carrying rights to vote in allcircumstances at general meeting of any other members of the Group, or had any option inrespect of such capital are set out below:

Name ofshareholder Capacity

Type ofShares

Number ofShares held

% of thetotal issued

A Shares


H Shares


sharecapital of

theCompany

CSAHC (Note) Beneficialowner

A share 4,150,050,000 (L) 59.10% – 42.27%

Interest incontrolledcorporation

H share 1,064,770,000 (L) – 38.10% 10.85%

Total 5,214,820,000 (L) – – 53.12%

Nan LungHoldingLimited (“NanLung”) (Note)

BeneficialOwner

Interest incontrolledcorporation

H Share 1,064,770,000 (L) – 38.10% 10.85%

Note: CSAHC was deemed to be interested in an aggregate of 1,064,770,000 H Shares through its directand indirect wholly-owned subsidiaries in Hong Kong, of which 31,120,000 H Shares were directlyheld by Yazhou Travel Investment Company Limited (representing approximately 1.11% of its thentotal issued H Shares) and 1,033,650,000 H Shares were directly held by Nan Lung (representingapproximately 36.98% of its then total issued H Shares). As Yazhou Travel Investment CompanyLimited is also an indirect wholly-owned subsidiary of Nan Lung, Nan Lung was also deemed to beinterested in the 31,120,000 H Shares held by Yazhou Travel Investment Company Limited.

As at the Latest Practicable Date, Mr. Si Xian Min, Mr. Wang Quan Hua, Mr. Yuan Xin An and Ms.Yang Li Hua were also senior management of CSAHC.

Save as disclosed above, as at the Latest Practicable Date, so far as was known to theDirectors, chief executive and Supervisors of the Company, no other person (other than theDirectors, chief executive or supervisors of the Company) had an interest or short positionin the Shares or underlying Shares under the provisions of Divisions 2 and 3 of Part XV ofthe SFO or who were, directly or indirectly, interested in 10% or more of the nominal valueof any class of share capital carrying rights to vote in all circumstances at general meetingof any other members of the Group.

4. DIRECTORS’ AND SUPERVISORS’ INTERESTS

(a) None of the Directors or Supervisors of the Company has any direct or indirectinterest in any assets which have been, since 31 December 2012, the date towhich the latest published audited financial statements of the Company were madeup, acquired or disposed of by or leased to, or which are proposed to be acquiredor disposed of by, or leased to, any member of the Group.


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(b) None of the Directors or Supervisors was materially interested in any contract orarrangement subsisting at the Latest Practicable Date and which was significant inrelation to the business of the Group.

5. SERVICE CONTRACTS

None of the Directors has any existing or proposed service contract with any memberof the Group which is not determinable by the Group within one year without payment ofcompensation (other than statutory compensation).

6. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirmed that there was not anymaterial adverse changes in the financial or trading position of the Group since 31December 2012, the date to which the latest published audited consolidated accounts of theGroup were made up.

7. MATERIAL LITIGATION

No member of the Group was engaged in any litigation or claims of materialimportance, and no such litigation or claim of material importance was known to theDirectors to be pending or threatened by or against any members of the Group, as at theLatest Practicable Date.

8. QUALIFICATION AND CONSENT OF EXPERT

The following is the qualification of the expert who has given opinion or advice, whichare contained or referred to in this circular:

Name Qualification

Asian Capital (Corporate Finance)Limited

a corporation licensed to carry out Type 1(dealing in securities), Type 4 (advising onsecurities), Type 6 (advising on corporate finance)and Type 9 (asset management) regulatedactivities under the SFO

As at the Latest Practicable Date, Asian Capital had no shareholding interest in anymember of the Group or the right (whether legally enforceable or not) to subscribe for or tonominate persons to subscribe for securities of any member of the Group.

As at the Latest Practicable Date, Asian Capital was not interested, directly orindirectly, in any assets which had since 31 December 2012 (being the date to which thelatest published audited accounts of the Company were made up) been acquired or disposedof by or leased to any member of the Group or which are proposed to be acquired ordisposed of by or leased to any member of the Group.


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Asian Capital has given and has not withdrawn its written consent to the issue of thiscircular with the inclusion herein of its letter and references to its name in the form andcontext in which it appears.

9. MISCELLANEOUS

(a) The joint company secretaries of the Company are Mr. Xie Bing and Dr. Liu Wei.

Mr. Xie Bing, aged 40, graduated from Nanjing University of Aeronautics andAstronautics, majoring in civil aviation management. He subsequently received amaster degree of business administration, a master degree of international financeand an Executive Master of Business Administration (EMBA) degree from JinanUniversity, the University of Birmingham, Britain and Tsinghua University,respectively. Mr. Xie is a senior economist. Mr. Xie used to work in the Planningand Development Department, Company Secretary Office of the Company andOffice of CSAHC. He has been the Company Secretary since November 2007.

Dr. Liu Wei, aged 56, graduated from the Northwest University of China, theChinese University of Political Science and Law, the University of Cambridge andthe University of Hong Kong, with a bachelor in Chinese literature, a masterdegree in law and a PhD in Law respectively. He also completed his CommonProfessional Examination (CPE) with the Manchester University in England, aswell as a Postgraduate Certificate in Laws (PCLL) with the University of HongKong. Dr. Liu is qualified to practice law in PRC, Hong Kong and England. Hehas extensive exposure in corporate finance and is a partner of DLA Piper HongKong.

(b) The registered address of the Company is at 278 Ji Chang Road, Guangzhou, PRCand the principal place of business of the Company in Hong Kong is at Unit B1,9th Floor, United Centre, 95 Queensway, Hong Kong.

(c) The Hong Kong branch share registrar and transfer office of the Company isHong Kong Registrars Limited, 17M Floor, Hopewell Centre, 183 Queen’s RoadEast, Wanchai, Hong Kong.

10. MATERIAL CONTRACTS

The following contracts have been entered into by the Group (not being contractentered into in the ordinary course of business) within the two years immediately precedingthe date of this circular:

(a) An aircraft sale agreement dated 23 December 2011, between Xiamen AirlinesCompany Limited (the “Xiamen Airlines”), a subsidiary of the Company, andHebei Airlines Company Limited (the “Hebei Airlines”), a connected person ofthe Company, pursuant to which Xiamen Airlines agreed to sell and HebeiAirlines agreed to purchase two B737-700 aircraft with registration numbers ofB-5212 and B-5215 at the consideration of approximately RMB426 million.


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(b) An aircraft acquisition agreement (the “Aircraft Acquisition Agreement 1”)dated 28 February 2012, between the Company and the Boeing Company (the“Boeing”), pursuant to which the Company agreed to acquire and Boeing agreedto sell ten Boeing B777-300ER aircraft. The catalogue price one BoeingB777-300ER aircraft is US$298 million.

(c) A supplemental agreement dated 16 March 2012 to a financial services agreementdated 8 November 2010 entered into between the Company and the FinanceCompany to revise the maximum daily balance of deposits (including thecorresponding interests thereon) to be placed by the Group at any time during thelife of the financial services agreement dated 8 November 2010 from RMB4billion to RMB6 billion on any given day.

(d) A subscription agreement dated 11 June 2012 was entered into between theCompany and CSAHC, pursuant to which CSAHC conditionally agreed tosubscribe and the Company conditionally agreed to allot and issue up to487,804,878 new A Shares for an aggregate of not more than RMB2 billion,equivalent to the subscription price of RMB4.10 per new A Share after theadjustment. The term of such agreement has been expired.

(e) An agreement dated 29 June 2012 was entered into between Xiamen Airlines andSouthern Airlines Culture and Media Co., Ltd. (the “SACM”), a connected personof the Company, pursuant to which Xiamen Airlines agreed to sell and SACMagreed to purchase the 51% equity interests in Xiamen Airlines Media Co., Ltd. atthe consideration of RMB43.12 million.

(f) A Boeing aircraft acquisition agreement (the “Aircraft Acquisition Agreement2”) dated 3 August 2012, between Xiamen Airlines and Boeing, pursuant to whichXiamen Airlines agreed to acquire and Boeing agreed to sell 40 Boeing B737series aircraft. The aggregate catalogue price of the 40 Boeing B737 aircraft isUS$3.36 billion.

(g) A joint venture agreement dated 24 September 2012 was entered between theCompany and Henan Civil Aviation Development and Investment Co., Ltd. (the“Henan Aviation Investment”) for the establishment of a joint venture companywith a total registered capital of RMB6 billion, which will be owned as 60% and40% by the Company and Henan Aviation Investment, respectively.

(h) An asset lease agreement (the “Asset Lease Agreement 1”) dated 25 September2012 between the Company and CSAHC, pursuant to which CSAHC leases to theCompany certain parcels of land, properties, and civil aviation structures andfacilities at existing locations in Guangzhou, Haikou, Wuhan, Hengyang, Jingzhou(previously known as “Shashi”), Nanyang, Beijing, Shanghai, Changsha,Shenyang, Dalian, Harbin and Changchun (other than certain properties located inHarbin, Changchun, Dalian, Beijing and Shanghai and certain assets located inNanyang) for a fixed term of three years, commencing from the 1 January 2012 to31 December 2014. The annual rent payable by the Company to CSAHC underthe Asset Lease Agreement 1 is RMB35,924,400.


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(i) An aircraft sale agreement dated 26 September 2012, between Xiamen Airlinesand Hebei Airlines, pursuant to which Xiamen Airlines agreed to sell and HebeiAirlines agreed to purchase one B737-800 Boeing aircraft at the consideration ofapproximately RMB256.8918 million.

(j) An aircraft acquisition agreement (the “Aircraft Acquisition Agreement 3”)dated 5 December 2012, between the Company and the Airbus S.A.S, pursuant towhich the Company agreed to acquire and the Airbus S.A.S agreed to sell tenAirbus A330-300 aircraft. The catalogue price of one Airbus A330-300 aircraft isUS$188 million.

(k) A property management framework agreement (the “Property ManagementFramework Agreement 1”) dated 28 December 2012 for a term of three yearsfrom 1 January 2012 to 31 December 2014 between the Company and GuangzhouChina Southern Airlines Property Management Company Limited (the“GCSAPMC”), a wholly-owned subsidiary of CSAHC, pursuant to which theCompany has renewed the appointment of GCSAPMC for provision of propertymanagement and maintenance services for the Company’s leased properties in theairport terminal, the base and the 110KV transformer substation at the new BaiyunInternational Airport (other than certain properties in the Company’s headquarterlocated in the old Baiyun Airport) to ensure the ideal working conditions of theCompany’s production and office facilities and physical environment, and thenormal operation of equipment. The annual agency fee payable by the Companyto GCSAPMC under the Property Management Framework Agreement 1 isRMB32,750,400.

(l) An airport property management framework agreement (the “PropertyManagement Framework Agreement 2”) dated 11 January 2013 was enteredbetween the Company and GCSAPMC to renew the property management at theold Baiyun Airport for a term of three years from 1 January 2012 to 31 December2014, pursuant to which the Company has renewed the appointment ofGCSAPMC for the provision of property management and maintenance servicesfor the Company’s properties at the old Baiyun Airport and surrounding inGuangzhou. The annual agency fee payable by the Company to GCSAPMC underthe Property Management Framework Agreement 2 is RMB22,250,000.

(m) An asset lease agreement (the “Asset Lease Agreement 2”) dated 24 January2013 between the Company and CSAHC, pursuant to which CSAHC agreed tolease to the Company certain lands, properties, facilities and structures atNanyang Jiangying Airport for the period commencing from 1 January 2012 to 31December 2012. The rent payable by the Company to CSAHC under the AssetLease Agreement 2 is RMB12,441,306.

(n) A media services framework agreement dated 19 April 2013 between theCompany and SACM for term of three years from 1 January 2013 to 31December 2015, pursuant to which the Company has appointed SACM to provideadvertising agency services, production of in-flight TV and movie program agencyservices, channel publicity and production services, public relations services


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relating to recruitments of airhostess, and services relating to the distribution ofnewspapers and magazines. The maximum annual aggregate amount of theservices fee payable by the Company to SACM shall not exceed RMB98 million,RMB105 million and RMB113 million for each of the financial years ending 31December 2013, 2014 and 2015, respectively.

(o) A catering services framework agreement dated 19 April 2013 for term of threeyears from 1 January 2013 to 31 December 2015 between the Company andShenzhen Air Catering Co., Ltd. (the “SACC”), a non-wholly-owned subsidiary ofCSAHC, pursuant to which SACC agrees to provide the in-flight lunch box, andorder, supply, allot, recycle, store and install the in-flight supply with theirrespective services for the arrival and departure flights designated by the Group atthe airport where SACC located at. The maximum annual aggregate amount of theservices fee payable by the Company to SACC shall not exceed RMB100 million,RMB115 million and RMB132.5 million for each of the financial years ending 31December 2013, 2014 and 2015, respectively.

(p) An asset lease agreement (the “Asset Lease Agreement 3”) dated 19 April 2013between the Company and CSAHC, pursuant to which CSAHC agreed to lease tothe Company certain lands, properties, facilities and structures at NanyangJiangying Airport for the period commencing from for the period from 1 January2013 to 31 December 2014. The annual rent payable by the Company to CSAHCunder the Asset Lease Agreement 3 is RMB30,259,100.

(q) A supplemental agreement dated 19 April 2013 to the import and export agencyframework agreement dated 28 January 2011 entered into between the Companyand Southern Airlines (Group) Import and Export Trading Company (“SAIETC”)to revise the maximum annual service fee payable by the Company to SAIETCfor the period from 1 January 2013 to 31 December 2013 from RMB97.2 millionto RMB160 million.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copy of the following documents will be available for inspection during normalbusiness hours at the head office and principal place of business of the Company in HongKong at Unit B1, 9th Floor, United Centre, 95 Queensway, Hong Kong from the date of thiscircular up to and including 26 November 2013:

(a) Articles of Association;

(b) the material contracts referred to in the paragraph headed “Material Contracts” inthis appendix;

(c) Financial Services Framework Agreement;

(d) Letter from Asian Capital;

(e) the 2011 and 2012 Annual Reports;


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(f) the 2013 Interim Report; and

(g) the circular dated 25 April 2013.


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Biographical details of the candidates proposed to be re-elected and elected asDirectors at the EGM are set out below:

1. Si Xian Min, aged 56, graduated with an Executive Master of Business Administration(EMBA) degree from Tsinghua University. He began his career in 1975. Mr. Si servedas the director of the political division of China Southern Airlines Henan Branch; asthe party secretary and vice president of Guizhou Airlines Company Limited; as theDeputy Party Secretary and Secretary of the Disciplinary Committee of the Company;and as the Party Secretary of CSAHC Northern Division. He has been the President ofthe Company from October 2004 to January 2009. Since 31 December 2004, Mr. Si hasbeen the Director of the Company. Since January 2009, Mr. Si has been the Presidentand Deputy Party Secretary of CSAHC and the Chairman of the Board.

2. Tan Wan Geng, aged 49, is an economist graduated from Zhongshan University,majoring in economic geography, with qualification of postgraduate degree. Mr. Tanbegan his career in civil aviation in 1990 and served as the head of the InfrastructureDepartment and Director of Human Resources and Administration Department of theBeijing Aircraft Maintenance and Engineering Corporation, the Deputy DirectorGeneral of Human Resources Division (Personnel and Education Division) of the CivilAviation Administration of China (CAAC), and has been the Director General andParty Secretary of Civil Aviation Administration of China Northeastern Region. He hasbeen the Party Secretary and Executive Vice President of the Company from January2006 to February 2007; the Party Member of CSAHC and the Party Secretary andExecutive Vice President of the Company from February 2007 to January 2009; theParty Member of CSAHC and the President and Party Secretary of the Company fromJanuary 2009 to February 2009; the Party Member of CSAHC and the President andDeputy Party Secretary of the Company from February 2009 to May 2011. Since May2011, Mr. Tan has been the Party Secretary of CSAHC and the President of theCompany. Mr. Tan has been the Director of the Company since 15 June 2006 and hasbeen the Vice Chairman of the Board since 24 January 2013.

3. Wang Quan Hua, aged 59, graduated with a university degree from the Party Schoolof the Central Committee of CPC majoring in economic management. Mr. Wang beganhis career in 1972. Mr. Wang served as the Director of the Planning and OperationDivision of CSAHC; the General Manager of Strategy and Development Department ofCSAHC; the Assistant to the President and the Director of the Strategy andDevelopment Department and the Vice President of CSAHC. Mr. Wang has served asthe Executive Vice President of CSAHC since September 2002. Since 13 May 2003,Mr. Wang has been the Director of the Company. Currently, Mr. Wang is also theChairman of Nan Lung Holding Limited, Guangzhou Southern Airline ConstructionCompany Limited, the director of TravelSky Technology Limited, Solar InsuranceGroup Company Limited, Yazhou Travel Investment Company Limited and ChinaNational Aviation Corp (HK) Ltd..

4. Yuan Xin An, aged 56, received university education in Aeronautical Machinery fromAir Force Engineer University and is a senior engineer. Mr. Yuan began his career inDecember 1976 and served as the Vice President of Engineering Department of China

APPENDIX III PROFILE OF DIRECTORS PROPOSED TO BERE-ELECTED AND ELECTED

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Southern Airlines Company, the Vice President of Guangzhou Aircraft MaintenanceEngineering Co., Ltd., the Chief Engineer and the General Manager of EngineeringDepartment of the Company. Mr. Yuan served as the Executive Vice President of theCompany from April 2002 to September 2007; the Executive Vice President of CSAHCsince September 2007; the Executive Vice President and Chief Legal Adviser ofCSAHC since July 2008. Since 30 November 2011, Mr. Yuan has been the Director ofthe Company. Currently, Mr. Yuan is also the Chairman of Southern Airlines (Group)Import and Export Trading Company Limited, China Southern Airlines GroupConstruction and Development Company Limited, MTU Maintenance Zhuhai Co., Ltd.,Dalian Acacia Town Villa Co., Ltd. and Shenzhen Air Catering Co., Ltd, and a directorof China Aircraft Services Limited.

5. Yang Li Hua, aged 57, graduated with a master degree from the Party School of theCentral Committee of CPC majoring in economics and management and is a seniorexpert of political science. Ms. Yang began her career in Air China InternationalCorporation in 1973, and served as the head of the in-flight service team, manager ofin-flight service division and deputy head of the Chief Flight Team of Air ChinaInternational Corporation. Subsequently, she was appointed as the General Manager ofthe Passenger Cabin Service Division of Air China International Corporation inSeptember 2000, the Vice President of Air China International Corporation in October2002, the Vice President of Air China Limited in September 2004, and Executive VicePresident of CSAHC in May 2009. From July 2010 to August 2012, Ms. Yang alsoacted as the Chairman of the Labour Union of CSAHC. Since January 24, 2013, Ms.Yang has been the Director of the Company. Currently, Ms. Yang is also the Chairmanof Southern Airlines Culture and Media Co., Ltd..

6. Zhang Zi Fang, aged 55, graduated with an Executive Master of BusinessAdministration (EMBA) degree from Tsinghua University and is a senior expert ofpolitical science. Mr. Zhang began his career in 1976. He served as the DeputyCommissar and subsequently the Commissar of the pilot corps of China NorthernAirlines Company; as the Party Secretary of the Jilin Branch of China NorthernAirlines Company; as the General Manager of Dalian Branch of CSAHC NorthernAirlines; as the Director of Political Works Department of CSAHC. Mr. Zhang hasbeen the Deputy Party Secretary and Secretary of the Disciplinary Committee of theCompany from February 2005 to December 2007. He has been the Executive VicePresident and the Deputy Party Secretary of the Company from December 2007 toFebruary 2009. Since February 2009, he has been the Party Secretary and ExecutiveVice President of the Company. Mr. Zhang has been the Director of the Company since30 June 2009. Currently, Mr. Zhang is also the Vice Chairman of Southern AirlinesCulture and Media Co., Ltd..

7. Xu Jie Bo, aged 48, graduated with a university degree from Tianjin Universitymajoring in infrastructure and engineering management, and was subsequently awardedwith a master degree in Business Administration from Hong Kong Baptist Universityand an Executive Master of Business Administration (EMBA) degree from TsinghuaUniversity and is a qualified senior accountant. Mr. Xu began his career in 1986. Heserved as the Director of the Financial Department of Central and Southern


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Administration of CAAC; as the Chief Accountant and General Manager of theFinancial Department of the Company. Mr. Xu served as the Director, Chief FinancialOfficer and Chief Accountant of the Company since April 2001 and as the Director,Executive Vice President, Chief Financial Officer and Chief Accountant of theCompany from August 2003 to September 2012. Mr. Xu has been the Director, SeniorExecutive Vice President, Chief Financial Officer and Chief Accountant of theCompany since September 2012. Currently, Mr. Xu is also the Chairman of GuizhouAirlines Company Limited and the Vice Chairman of Sichuan Airlines CorporationLimited.

8. Li Shao Bin, aged 48, graduated with a university degree from the Party School of theCentral Committee of CPC majoring in economics and management and is an expert ofpolitical science. Mr. Li began his career in 1984, and served as the Deputy Head ofPromotion Department of the Company, the Director of Political Department ofGuangzhou Flight Operations Division of the Company, and the Director of PoliticalDepartment and Deputy Party Secretary of Guangzhou Flight Operations Division ofthe Company. Subsequently, he was appointed as Party Secretary of Guangzhou FlightOperations Division of the Company in May 2004. Mr. Li served as the Party Secretaryand Deputy General Manager of Guangzhou Flight Operations Division of theCompany from March 2006 to August 2012. Mr. Li has been the Chairman of theLabour Union of the Company since August 2012 and the Director of the Companysince 24 January 2013.

9. Wei Jin Cai, aged 63, graduated from the Party School of the Central Committee ofCPC majoring in economics and management. Mr. Wei has many years of experiencesin civil aviation. He conducted an in-depth study on the operation and management ofcivil aviation and is influential in the civil aviation industry. Mr. Wei served as theDeputy Party Secretary of the Party Committee of the headquarter of CAAC, the PartySecretary of Civil Aviation Management Institute of China from March 1993 toNovember 2008, the President of Civil Aviation Management Institute of China fromNovember 2008 to August 2010 and the independent director of Shandong Airlines Co.,Ltd. Mr. Wei has been the Independent Non-executive Director of the Company since29 December 2010. Currently, he is also the independent director of XiamenInternational Airport Co., Ltd., the independent non-executive director of ASR HoldingsLimited and the independent director of E-Food Group Co., Ltd..

10. Ning Xiang Dong, aged 48, graduated from the Quantitative Economics Faculty of theSchool of Economics and Management of Tsinghua University with a doctor degree.Mr. Ning began his career in 1990 and served as the assistant, lecturer and associateprofessor at Tsinghua University and the Executive Deputy Director of the NationalCenter for Economic Research (NCER) at Tsinghua University. He was also a visitingscholar at Harvard Business School, University of Illinois, University of New SouthWales, University of Sydney and Chinese University of Hong Kong. Currently, heserves as the professor and the doctorate-tutor of the School of Economics andManagement of Tsinghua University and the executive director of Centre for CorporateGovernance of Tsinghua University. Mr. Ning has been the Independent Non-executive


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Director of the Company since 29 December 2010. He is also the independent directorof Aerospace Hi-Tech Holding Group Co., Ltd. and Sichuan ChangHong ElectricCompany Limited.

11. Liu Chang Le, aged 62, was conferred an honorary doctoral degree in literature by theCity University of Hong Kong and is a founder of Phoenix Satellite Television. Mr. Liuhas been the Chairman and Chief Executive Officer of Phoenix Satellite TelevisionCompany Limited since 1996 and the Chairman and Chief Executive Officer ofPhoenix Satellite Television Holdings Limited, a company listed on the Stock Exchangesince 2000. Mr. Liu gained widespread recognition both locally and overseas for hisenthusiasm for and achievements in the media industry. Mr. Liu is the recipient ofnumerous titles and awards, among which include “Wiseman of the Media Industry”,“the Most Innovative Chinese Business Leaders in the Asia Pacific Region”, “the MostEntrepreneurial Chinese Business Leaders”, and has been awarded the “Robert MundellSuccessful World CEO Award”, the “Man of Year for Asia Brand Innovation Award”and the “Person of the Year” award of the Chinese Business Leaders Annual Meeting.Since 2005, Mr. Liu has been the Chairman of the iEMMYs Festival, which is run bythe International Academy of Television Arts & Sciences. In 2008, Mr. Liu received theInternational Emmy® Directorate Award. Mr. Liu was appointed as honorary chairmanof “World Chinese-language Media Cooperation Alliance” in 2009 and appointed asspecial consultant to the 8th Council of the Buddhist Association of China in 2010. Mr.Liu was a member of the Tenth, the Eleventh and the Twelfth National Committee ofthe Chinese People’s Political Consultative Conference, served as the Vice Chairman ofthe sub-committee on Education, Science, Culture, Health and Sport of the EleventhNational Committee of the Chinese People’s Political Consultative Conference, and isserving as a member of standing committee of the Twelfth National Committee of theChinese People’s Political Consultative Conference. Mr. Liu has been appointed aJustice of the Peace by the government of the Hong Kong Special AdministrativeRegion. In July 2010, Mr. Liu was awarded the Silver Bauhinia Star by the Hong KongSpecial Administrative Region. Mr. Liu has become an Independent NonexecutiveDirector of the Company since 30 November 2011.

12. Tan Jin Song, aged 48, graduated from Renmin University of China with an on-jobdoctor degree in Accounting. Mr. Tan began his career in 1985 and was a teacher inShaoyang School of Finance and Accounting of Hunan Province and the Deputy Deanof the School of Management of Zhongshan University; Mr. Tan acted as a professor ofthe School of Management of Zhongshan University from October to December 2008;and as the Party Secretary of the School of Management of Zhongshan University sinceDecember 2008. Currently, he is the independent director of Yihua Real Estate Co.,Ltd., Sundiro Holding Co., Ltd., Grandhope Biotech Co., Ltd. and Poly Real EstateCompany Limited. Mr. Tan also act as the independent non-executive director ofWelling Holding Limited, the external supervisor of China Guangfa Bank and theindependent supervisor of Sino-Singapore Guangzhou Knowledge City Investment andDevelopment Co., Ltd..


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As at the Latest Practicable Date, saved as disclosed, none of the above directorcandidates has held any directorships in other publicly listed companies in the last threeyears. If the above candidates are appointed as Directors, each of them will enter into aservice contract with the Company and shall hold their office until the expiry of the term ofthe seventh Session of the Board. Pursuant to the “Administrative Measures on Directors’Remuneration of China Southern Airlines Company Limited”, the annual basic emolument ofa Director is determined with reference to the responsibilities, risk and contributions of his/her position, i.e. RMB249,000 for Chairman of the Board, RMB224,000 for vice-Chairmanof the Board, RMB199,000 for a Director and RMB150,000 for an independentnon-executive Director. Further details of the emolument for Directors have been disclosedin the circular of the Company dated 14 May 2009 and 14 October 2011.

As at the Latest Practicable Date, save as disclosed, none of the above directorcandidates had any relationship with any Directors, supervisors, senior management,substantial or controlling shareholders of the Company; and none of the above directorcandidates had any interests in shares of the Company within the meaning of Part XV of theSFO (Chapter 571 of the Laws of Hong Kong).

Each of the candidates for independent non-executive Directors has met theindependence requirements as set out in Rule 3.13 of the Listing Rules.

There is no other matter relating to the proposed appointment of Directors that needs tobe brought to the attention of the Shareholders, nor is there any other information to bedisclosed pursuant to any of the requirements of Rule 13.51(2)(h) to (v) of the ListingRules.


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Biographical details of the candidates proposed to be re-elected and elected asSupervisors at the EGM and the biographical details of Supervisors representing theemployees are set out below:

1. Pan Fu, aged 50, graduated with a master degree from Chongqing University majoringin power systems and automation, and is a senior engineer. Mr. Pan began his career in1986, and served successively as the Deputy Chief Engineer of Test Research Instituteof Electric Power Bureau of Yunnan Province and the Deputy Head of the PlanningDepartment of Electric Power Industry Bureau of Yunnan Province (Group Company),the Deputy Director of the Planning & Development Department of Yunnan ElectricPower Group Co., Ltd., the Deputy Director and Director of Kunming Power Plant, theDeputy Chief Engineer and Chief Engineer of Yunnan Electric Power Corporation, theDeputy Director and Director of the Department of Security Supervision of ChinaSouthern Power Grid Company Ltd., the Director of the China Southern Power GridTechnology and Research Center. He served as the General Manager and Deputy PartySecretary of the Guizhou Power Grid Corporation from January 2005 to November2007, and served as the Director of the Planning Development Department of ChinaSouthern Power Grid Company Ltd. from November 2007 to November 2010. Mr. Panhas been the Team Leader of the Discipline Inspection Commission of CSAHC sinceNovember 2010 and the Chairman of the Supervisory Committee of the Company since29 December 2010. Currently, he is also the Chairman of China Southern AirlinesGroup Passenger and Cargo Agent Company Limited.

2. Li Jia Shi, aged 52, graduated from Guangdong Polytechnic Normal Universitymajoring in economics and mathematics and obtained an Executive Master of BusinessAdministration (EMBA) degree from Tsinghua University and is an expert of politicalscience. Mr. Li began his career in 1976. He served as the Deputy Head of theOrganization Division of the Party Committee of the Company, Party Secretary andDeputy General Manager of Guangzhou Nanland Air Catering Company Limited, theHead of the Organization Division of the Party Committee of the Company, theChairman of Southern Airlines Ka Yuen (Guangzhou) Aviation Supply CompanyLimited and Guangzhou Nanland Air Catering Company Limited. He served as theDeputy Secretary of the Disciplinary Committee and the Director of the DisciplinaryCommittee Office of the Company from December 2003 to December 2007. Mr. Li hasbeen the Secretary of the Disciplinary Committee of the Company since December2007 and has been the Team Deputy Leader of the Discipline Inspection Commissionof CSAHC and the Secretary of Disciplinary Committee of the Company sinceFebruary 2012. Mr. Li has been the Supervisor of the Company since 30 June 2009.

3. Zhang Wei, aged 47, graduated with a master degree from Tianjin University majoringin investment skills and economics and obtained an Executive Master of BusinessAdministration (EMBA) degree from Tsinghua University and is a senior accountant.Ms. Zhang began her career in 1988 and served as the General Manager Assistant andDeputy General Manager of the Finance Department of the Company, the DeputyDirector of the Supervisory Bureau and the Director of the Audit Division of CSAHCand the General Manager of SA Finance. Ms. Zhang served as the Deputy Director ofthe Supervisory Bureau and the Director of the Audit Division of CSAHC from

APPENDIX IV PROFILE OF SUPERVISORS PROPOSED TO BERE-ELECTED AND ELECTED

– 47 –

October 2007 to October 2008. Since October 2008, she has been the Director of theAudit Division of CSAHC. Ms. Zhang has been the Supervisor of the Company sinceJune 2008. Currently, Ms. Zhang is also the Chairman of Supervisory Committee ofSouthern Airlines Culture and Media Co., Ltd, SA Finance, Southern Airlines (Group)Import and Export Trading Company Limited and China Southern Airlines GroupConstruction and Development Company Limited and the Director of GuangzhouSouthern Airline Construction Company Limited.

4. Yang Yi Hua, aged 53, has a university degree, and is an accountant and anInternational Certified Internal Auditor. Ms. Yang served as the Manager of theFinancial Office of the Company’s Financial Division, and Deputy General Manager ofthe Company’s Audit Department. Ms. Yang has been the General Manager of theCompany’s Audit Department since May 2002 and the Supervisor of the Companysince June 2004. Currently, Ms. Yang is also the Chairman of the SupervisoryCommittee of Guizhou Airlines, Guangzhou Baiyun International Logistic CompanyLimited, Beijing China Southern Airlines Ground Service Company Limited and NanLung International Freight Limited and the supervisor of Xiamen Airlines, SA Financeand Chongqing Airlines.

5. Wu De Ming, aged 55, graduated from South China Normal University majoring inpolitical management. He obtained a degree after beginning his career from 1976. Mr.Wu served as the Director of the political division of Operation Department of ChinaSouthern Airlines, as the Deputy Party Secretary and Party Secretary of Guangzhouticket office of China Southern Airlines, and as the Deputy Secretary and Secretary ofthe party general branch of ticket office of Transportation Department of ChinaSouthern Airlines. Mr. Wu served as the Director of the Disciplinary SupervisionDepartment of CSAHC from March 2001 to December 2003; and as the GeneralDirector of the Supervision Bureau and Chief Officer of Disciplinary Committee Officefrom December 2003 to April 2009. He has been a member of Party Committee ofMarketing Committee, Secretary to the Disciplinary Committee and President of theLabour Union since April 2009. Save as disclosed above, Mr. Wu De Ming has anyrelationship with any Directors, Supervisors, senior management, substantialshareholders of the Company.

As at the Latest Practicable Date, saved as disclosed, none of the above supervisorcandidates has held any directorships in other publicly listed companies in the last threeyears. If the above candidates are appointed as Supervisors, each of them will enter into aservice contract with the Company and shall hold their office until the expiry of the term ofthe seventh Session of the Supervisory Committee. Pursuant to the “Administrative Measureson Supervisors’ Remuneration of China Southern Airlines Company Limited”, theemolument of a Supervisor is determined with reference to the responsibilities, risk andcontributions of his/her position, i.e. RMB199,000 for Chairman of the SupervisoryCommittee and RMB159,000 for a Supervisor. Further details of the emolument forSupervisors have been disclosed in the circular of the Company dated 14 May 2009.


– 48 –

As at the Latest Practicable Date, save as disclosed, none of the above supervisorcandidates had any relationship with any Directors, supervisors, senior management,substantial or controlling shareholders of the Company; and none of the above supervisorcandidates had any interests in shares of the Company within the meaning of Part XV of theSFO (Chapter 571 of the Laws of Hong Kong).

There is no other matter relating to the proposed appointment of Supervisors that needsto be brought to the attention of the Shareholders, nor is there any other information to bedisclosed pursuant to any of the requirements of Rule 13.51(2)(h) to (v) of the ListingRules.


– 49 –

The details of the proposed amendment to the Articles of Association and itsappendixes (the Procedural Rules of the Shareholders’ General Meeting, the ProceduralRules of Board of Directors and the Procedural Rules of the Supervisory Committee) are asfollows:

1. Articles of Association:

(1) Article 5

Original:

“Address of the Company: Guangzhou Economic & Technology DevelopmentZone, Guangdong Province, the PRC

Telephone No.: (020) 86123303

Facsimile No.: (020) 86644623”

To be amended as:

“Address of the Company: House 203, No. 233 Kaifa Avenue, GuangzhouEconomic & Technology Development Zone,Luogang District, Guangzhou, GuangdongProvince

Zip code: 510730”

(2) Clause 1 of Article 160

Original:

“The Company shall have a Board of Directors which is responsible to theshareholders’ general meetings. The Board of Directors shall comprise twelvemembers, one of whom shall be the chairman. The chairman and the vicechairman shall be elected with the approval of more than half of all thedirectors.”

To be amended as:

“The Company shall have a Board of Directors which is responsible to theshareholders’ general meetings. The Board of Directors shall comprise thirteenmembers, one of whom shall be the chairman. The chairman and the vicechairman shall be elected with the approval of more than half of all thedirectors.”

APPENDIX V PROPOSED AMENDMENT TO THE ARTICLES OFASSOCIATION AND PROCEDURAL RULES

– 50 –

2. The Procedural Rules of the Shareholders’ General Meeting:


Original:

“When the Board of Directors issues the notice for the convening of ashareholders’ general meeting, the meeting shall not be postponed without reason.In case the shareholders’ general meeting must be postponed under specialcircumstances, a notice regarding the postponement must be issued at least fiveworking days before the original date of the shareholders’ general meeting. In thepostponement notice, the Board of Directors must state the reasons for thepostponement and the date of the postponed meeting.”

To be amended as:

“When the Board of Directors issues the notice for the convening of ashareholders’ general meeting, the meeting shall not be postponed without reason.In case the shareholders’ general meeting must be postponed under specialcircumstances, a notice regarding the postponement must be issued at least twoworking days before the original date of the shareholders’ general meeting. In thepostponement notice, the Board of Directors must state the reasons for thepostponement and the date of the postponed meeting.”

(2) New content is added as Clause 2 of Article 60

“Rights conferred on any class of shareholders in the capacity of shareholdersmay not be varied or abrogated unless approved by a special resolution ofshareholders in shareholders’ general meeting and by holders of shares of thatclass at a separate meeting. Resolutions of a class of shareholders shall be passedby votes representing more than two-thirds of the voting rights of shareholders ofthat class represented at the relevant meeting who are entitled to vote at classmeetings.”

(3) Article 73

Original:

“The directors, supervisors, secretary to the Board of Directors, convener or theirrepresentative, chairman of the meeting shall sign on the minutes of the meeting,and ensure that the contents of the minutes of meetings are true, accurate andcomplete. The minutes of meeting shall be kept together with the validinformation such as the attendance register of the attending shareholders and thepower of attorney of their proxies, the votes cast by way of internet and by othermeans shall be kept by the secretary to the Board of Directors as the Company’spermanent record.”


– 51 –

To be amended as:

“The directors, supervisors, board secretary, convener or their representative,chairman of the meeting shall sign on the minutes of the meeting, and ensure thatthe contents of the minutes of meetings are true, accurate and complete. Theminutes of meeting shall be kept together with the valid information such as theattendance register of the attending shareholders and the power of attorney oftheir proxies, the votes cast by way of internet and by other means shall be keptat the premises of the Company for a period ten years.”

3. The Procedural Rules of the Board of Directors:


Original:

“The Board of Directors shall comprise twelve members, one of whom shall bethe chairman and two of whom shall be the vice chairman. The chairman and thevice chairman shall be elected with the approval of more than half of all thedirectors.”

To be amended as:

“The Board of Directors shall comprise thirteen members, one of whom shall bethe chairman and two of whom shall be the vice chairman. The chairman and thevice chairman shall be elected with the approval of more than half of all thedirectors.”

(2) Item (13) of Clause 1 of Article 36

Original:

“to appoint or remove the general manager and the secretary to the Board basedon the nomination by the chairman of the Board and to determine theirremuneration; to appoint or remove the deputy general manager and ChiefFinancial Officer and Chief Economist, Chief Engineer and Chief Pilot of theCompany based on the nomination by the general manager.”


– 52 –

To be amended as:

“to appoint or remove the general manager and the secretary to the Board basedon the nomination by the chairman of the Board and to determine theirremuneration; to appoint or remove the deputy general manager, Chief FinancialOfficer, Chief Economist, Chief Engineer, Chief Pilot and other seniormanagement of the Company based on the nomination by the general managerand to determine their remuneration.”

(3) Article 61

Original:

“The Chairman of the Board of Directors shall convene an extraordinary boardmeeting within ten working days when it is:

(1) considered by the chairman that it is necessary;

(2) proposed by one third or more of the directors;

(3) proposed by more than half of the independent directors;

(4) proposed by shareholders representing more than one tenth of voting rights;

(5) proposed by the supervisory committee;

(6) proposed by one third or more of the supervisors;

(7) proposed by the general manager;

(8) requested to be convened by the securities regulatory organ;

(9) otherwise provided by the Articles of Association.”

To be amended as:

“The Chairman of the Board of Directors shall convene and preside over anextraordinary board meeting within ten days when it is:




(4) proposed by shareholders representing more than one tenth of voting rights;


– 53 –







Original:

“Board meeting shall be convened by the following ways:

(1) notice for convening a board meeting shall be given to all members, viadirect delivery, fax or email, ten days before the date of the proposedmeeting;

(2) notice for convening an extraordinary board meeting shall be given to allmembers, via direct delivery, fax or email, five days before the date of theproposed meeting;”

To be amended as:


(1) notice for convening a board meeting shall be given to all members, viadirect delivery, fax, email or other methods where delivery can be confirmed,ten days before the date of the proposed meeting;

(2) notice for convening an extraordinary board meeting shall be given to allmembers, via direct delivery, fax, email or other methods where delivery canbe confirmed, five days before the date of the proposed meeting;”


Original:

“Notice of a board meeting shall contain:

(1) the date and venue of the meeting;

(2) the method for which the meeting is held;

(3) the matters to be discussed (the agendas);


– 54 –

(4) the convener and the chairman of the meeting, the person who proposes thespecial board meeting and his/her written proposal;

(5) the materials necessary for the directors to vote in the meeting;

(6) the request for the personal attendance of the directors or the attendancethrough the appointment of an alternate director;

(7) the contact person and the method of contact.”

To be amended as:





(4) the convener and the chairman of the meeting, the person who proposes thespecial board meeting and his/her written proposal;

(5) the date of the notice. The materials necessary for the directors to vote inthe meeting;

(6) the request for the personal attendance of the directors or the attendancethrough the appointment of an alternate director;


4. The Procedural Rules of the Supervisory Committee:

(1) New contents is added as item (9), (10), (11) and (12) of Clause 1 of Article 10

“(9) The person has been involved in criminal offences subject to investigationby judicial authorities and the case has yet been settled;

(10) The person is not a natural person;

(11) A period of five years has not yet elapsed since the person was adjudged bythe relevant governing authority to be guilty of contravention of provisionsof securities regulations involving fraud or dishonesty; or

(12) Other stipulations of laws, administrative regulations rules or departmentalrules.”


– 55 –

(2) New contents is added as item (9) of Clause 1 of Article 23

“(9) To represent the Company in negotiation with or bringing an action against adirector;”

The original item (9) is renumbered subsequently as item (10).

(3) New contents is added as item (7) and (8) of Clause 1 of Article 34

“(7) the Company, the director, the supervisor or the senior management is suedby shareholders;

(8) the Company, the director, the supervisor or the senior management ispunished by the securities regulatory organ or is condemned by ShanghaiStock Exchange;”

The original item (7) and (8) are renumbered subsequently as item (9) and (10),respectively.

(4) New contents is added as item (5) of Clause 1 of Article 44

“(5) to make audit opinion for the connected transactions of the Company;”

The original item (5), (6), (7) and (8) are renumbered subsequently as item (6),(7), (8) and (9), respectively.

(5) Article 45

Original:

“The supervisory committee meetings shall keep minutes of meeting. Supervisorspresent at the meeting and the person taking the minutes (which could be aSupervisor or an authorized person by the supervisory committee) shall sign onthe meeting minutes. Supervisors can request to have the speech they make in themeeting recorded in the minutes. The meeting minutes of supervisory committeeshall be safely and properly kept as an important file of the Company. Themeeting minutes of supervisory committee shall be kept by the secretary to theBoard of Directors as the Company’s permanent record.”


– 56 –

To be amended as:

“The supervisory committee meetings shall keep minutes of meeting. Supervisorspresent at the meeting and the person taking the minutes (which could be aSupervisor or an authorized person by the supervisory committee) shall sign onthe meeting minutes. Supervisors can request to have the speech they make in themeeting recorded in the minutes. The meeting minutes of supervisory committeeshall be safely and properly kept as an important file of the Company. Themeeting minutes of supervisory committee shall be properly kept as a file of theCompany for ten years.”


– 57 –


NOTICE OF EGM

NOTICE IS HEREBY GIVEN that the second extraordinary general meeting of 2013(the “EGM”) of China Southern Airlines Company Limited (the “Company”) will be held atNo. 1 Conference Room, 4th Floor, Pearl Hotel CSN, No. 5 Road, Southern Work District,Baiyun International Airport, Guangzhou, Guangdong Province, the PRC on Thursday, 26December 2013 at 8:30 a.m for the purpose of considering, if thought fit, to approve thefollowing resolutions. Unless otherwise indicated, capitalised terms used herein have thesame meanings as those defined in the circular of the Company dated 11 November 2013(the “Circular”):

AS ORDINARY RESOLUTIONS

To consider and, if thought fit, approve the following resolutions as ordinaryresolutions:

1. to consider and approve the re-election and election of Directors for the seventhsession of the Board;

1.1 to consider and approve the re-election of Mr. Si Xian Min as anon-executive Director of the Company to hold office until the expiry of theterm of the seventh Session of the Board.

1.2 to consider and approve the re-election of Mr. Wang Quan Hua as anon-executive Director of the Company to hold office until the expiry of theterm of the seventh Session of the Board.

1.3 to consider and approve the re-election of Mr. Yuan Xin An as anon-executive Director of the Company to hold office until the expiry of theterm of the seventh Session of the Board.

1.4 to consider and approve the re-election of Ms. Yang Li Hua as anon-executive Director of the Company to hold office until the expiry of theterm of the seventh Session of the Board.

1.5 to consider and approve the re-election of Mr. Tan Wan Geng as anexecutive Director of the Company to hold office until the expiry of the termof the seventh Session of the Board.

NOTICE OF EGM

– 58 –

1.6 to consider and approve the re-election of Mr. Zhang Zi Fang as anexecutive Director of the Company to hold office until the expiry of the termof the seventh Session of the Board.

1.7 to consider and approve the re-election of Mr. Xu Jie Bo as an executiveDirector of the Company to hold office until the expiry of the term of theseventh Session of the Board.

1.8 to consider and approve the re-election of Mr. Li Shao Bin as an executiveDirector of the Company to hold office until the expiry of the term of theseventh Session of the Board.

1.9 to consider and approve the re-election of Mr. Wei Jin Cai as an independentnon-executive Director of the Company to hold office until the expiry of theterm of the seventh Session of the Board.

1.10 to consider and approve the re-election of Mr. Ning Xing Dong as anindependent non-executive Director of the Company to hold office until theexpiry of the term of the seventh Session of the Board.

1.11 to consider and approve the re-election of Mr. Liu Chang Le as anindependent non-executive Director of the Company to hold office until theexpiry of the term of the seventh Session of the Board.

1.12 to consider and approve the election of Mr. Tan Jin Song as an independentnon-executive Director of the Company to hold office until the expiry of theterm of the seventh Session of the Board.

2. to consider and approve the re-election of Supervisors for the seventh session ofthe Supervisory Committee;

2.1 to consider and approve the re-election of Mr. Pan Fu as a Supervisorrepresenting the Shareholders of the Company to hold office until the expiryof the term of the seventh Session of the Supervisory Committee.

2.2 to consider and approve the re-election of Mr. Li Jia Shi as a Supervisorrepresenting the Shareholders of the Company to hold office until the expiryof the term of the seventh Session of the Supervisory Committee.

2.3 to consider and approve the re-election of Ms. Zhang Wei as a Supervisorrepresenting the Shareholders of the Company to hold office until the expiryof the term of the seventh Session of the Supervisory Committee.

3. to consider and approve the financial services framework agreement dated 8November 2013 entered into between Southern Airlines Group Finance CompanyLimited and the Company;

NOTICE OF EGM

– 59 –

AS SPECIAL RESOLUTION

To consider and, if thought fit, approve the following resolution as a special resolution:

4. THAT the following amendments to the Articles of Association and itsappendixes (the Procedural Rules of the Shareholders’ General Meeting, theProcedural Rules of Board of Directors and the Procedural Rules of SupervisoryCommittee) be and are hereby approved:

(1) Articles of Association

Article 5

Original:

“Address of the Company: Guangzhou Economic & TechnologyDevelopment Zone, Guangdong Province, thePRC

Telephone No.: (020) 86123303

Facsimile No.: (020) 86644623”

To be amended as:

“Address of the Company: House 203, No. 233 Kaifa Avenue,Guangzhou Economic & TechnologyDevelopment Zone, Luogang District,Guangzhou, Guangdong Province

Zip code: 510730”

Clause 1 of Article 160

Original:

“The Company shall have a Board of Directors which is responsible to theshareholders’ general meetings. The Board of Directors shall comprisetwelve members, one of whom shall be the chairman. The chairman and thevice chairman shall be elected with the approval of more than half of all thedirectors.”

To be amended as:

“The Company shall have a Board of Directors which is responsible to theshareholders’ general meetings. The Board of Directors shall comprisethirteen members, one of whom shall be the chairman. The chairman and thevice chairman shall be elected with the approval of more than half of all thedirectors.”

NOTICE OF EGM

– 60 –

(2) The Procedural Rules of the Shareholders’ General Meeting


Original:

“When the Board of Directors issues the notice for the convening of ashareholders’ general meeting, the meeting shall not be postponed withoutreason. In case the shareholders’ general meeting must be postponed underspecial circumstances, a notice regarding the postponement must be issued atleast five working days before the original date of the shareholders’ generalmeeting. In the postponement notice, the Board of Directors must state thereasons for the postponement and the date of the postponed meeting.”

To be amended as:

“When the Board of Directors issues the notice for the convening of ashareholders’ general meeting, the meeting shall not be postponed withoutreason. In case the shareholders’ general meeting must be postponed underspecial circumstances, a notice regarding the postponement must be issued atleast two working days before the original date of the shareholders’ generalmeeting. In the postponement notice, the Board of Directors must state thereasons for the postponement and the date of the postponed meeting.”

New content is added as Clause 2 of Article 60

“Rights conferred on any class of shareholders in the capacity ofshareholders may not be varied or abrogated unless approved by a specialresolution of shareholders in shareholders’ general meeting and by holders ofshares of that class at a separate meeting. Resolutions of a class ofshareholders shall be passed by votes representing more than two-thirds ofthe voting rights of shareholders of that class represented at the relevantmeeting who are entitled to vote at class meetings.”

Article 73

Original:

“The directors, supervisors, secretary to the Board of Directors, convener ortheir representative, chairman of the meeting shall sign on the minutes of themeeting, and ensure that the contents of the minutes of meetings are true,accurate and complete. The minutes of meeting shall be kept together withthe valid information such as the attendance register of the attendingshareholders and the power of attorney of their proxies, the votes cast byway of internet and by other means shall be kept by the secretary to theBoard of Directors as the Company’s permanent record.”

NOTICE OF EGM

– 61 –

To be amended as:

“The directors, supervisors, board secretary, convener or their representative,chairman of the meeting shall sign on the minutes of the meeting, and ensurethat the contents of the minutes of meetings are true, accurate and complete.The minutes of meeting shall be kept together with the valid informationsuch as the attendance register of the attending shareholders and the powerof attorney of their proxies, the votes cast by way of internet and by othermeans shall be kept at the premises of the Company for a period ten years.”

(3) The Procedural Rules of Board of Directors


Original:

“The Board of Directors shall comprise twelve members, one of whom shallbe the chairman and two of whom shall be the vice chairman. The chairmanand the vice chairman shall be elected with the approval of more than halfof all the directors.”

To be amended as:

“The Board of Directors shall comprise thirteen members, one of whom shallbe the chairman and two of whom shall be the vice chairman. The chairmanand the vice chairman shall be elected with the approval of more than halfof all the directors.”

Item (13) of Clause 1 of Article 36

Original:

“to appoint or remove the general manager and the secretary to the Boardbased on the nomination by the chairman of the Board and to determine theirremuneration; to appoint or remove the deputy general manager and ChiefFinancial Officer and Chief Economist, Chief Engineer and Chief Pilot ofthe Company based on the nomination by the general manager.”

To be amended as:

“to appoint or remove the general manager and the secretary to the Boardbased on the nomination by the chairman of the Board and to determine theirremuneration; to appoint or remove the deputy general manager, ChiefFinancial Officer, Chief Economist, Chief Engineer, Chief Pilot and othersenior management of the Company based on the nomination by the generalmanager and to determine their remuneration.”

NOTICE OF EGM

– 62 –

Article 61

Original:

“The Chairman of the Board of Directors shall convene an extraordinaryboard meeting within ten working days when it is:




(4) proposed by shareholders representing more than one tenth of votingrights;






To be amended as:

“The Chairman of the Board of Directors shall convene and preside over anextraordinary board meeting within ten days when it is:




(4) proposed by shareholders representing more than one tenth of votingrights;





NOTICE OF EGM

– 63 –



Original:


(1) notice for convening a board meeting shall be given to all members, viadirect delivery, fax or email, ten days before the date of the proposedmeeting;

(2) notice for convening an extraordinary board meeting shall be given toall members, via direct delivery, fax or email, five days before the dateof the proposed meeting;”

To be amended as:


(1) notice for convening a board meeting shall be given to all members, viadirect delivery, fax, email or other methods where delivery can beconfirmed, ten days before the date of the proposed meeting;

(2) notice for convening an extraordinary board meeting shall be given toall members, via direct delivery, fax, email or other methods wheredelivery can be confirmed, five days before the date of the proposedmeeting;”


Original:





(4) the convener and the chairman of the meeting, the person who proposesthe special board meeting and his/her written proposal;

(5) the materials necessary for the directors to vote in the meeting;

(6) the request for the personal attendance of the directors or theattendance through the appointment of an alternate director;

NOTICE OF EGM

– 64 –


To be amended as:





(4) the convener and the chairman of the meeting, the person who proposesthe special board meeting and his/her written proposal;

(5) the date of the notice. The materials necessary for the directors to votein the meeting;

(6) the request for the personal attendance of the directors or theattendance through the appointment of an alternate director;


(4) the Procedural Rules of Supervisory Committee

New contents is added as item (9), (10), (11) and (12) of Clause 1 ofArticle 10

“(9) The person has been involved in criminal offences subject toinvestigation by judicial authorities and the case has yet been settled;

(10) The person is not a natural person;

(11) A period of five years has not yet elapsed since the person wasadjudged by the relevant governing authority to be guilty ofcontravention of provisions of securities regulations involving fraud ordishonesty; or

(12) Other stipulations of laws, administrative regulations rules ordepartmental rules.”

New contents is added as item (9) of Clause 1 of Article 23

“(9) To represent the Company in negotiation with or bringing an actionagainst a director;”

The original item (9) is renumbered subsequently as item (10).

NOTICE OF EGM

– 65 –

New contents is added as item (7) and (8) of Clause 1 of Article 34

“(7) the Company, the director, the supervisor or the senior management issued by shareholders;

(8) the Company, the director, the supervisor or the senior management ispunished by the securities regulatory organ or is condemned byShanghai Stock Exchange;”

The original item (7) and (8) are renumbered subsequently as item (9) and(10), respectively.

New contents is added as item (5) of Clause 1 of Article 44

“(5) to make audit opinion for the connected transactions of the Company;”

The original item (5), (6), (7) and (8) are renumbered subsequently as item(6), (7), (8) and (9), respectively.

Article 45

Original:

“The supervisory committee meetings shall keep minutes of meeting.Supervisors present at the meeting and the person taking the minutes (whichcould be a Supervisor or an authorized person by the supervisory committee)shall sign on the meeting minutes. Supervisors can request to have thespeech they make in the meeting recorded in the minutes. The meetingminutes of supervisory committee shall be safely and properly kept as animportant file of the Company. The meeting minutes of supervisorycommittee shall be kept by the secretary to the Board of Directors as theCompany’s permanent record.”

To be amended as:

“The supervisory committee meetings shall keep minutes of meeting.Supervisors present at the meeting and the person taking the minutes (whichcould be a Supervisor or an authorized person by the supervisory committee)shall sign on the meeting minutes. Supervisors can request to have thespeech they make in the meeting recorded in the minutes. The meetingminutes of supervisory committee shall be safely and properly kept as animportant file of the Company. The meeting minutes of supervisorycommittee shall be properly kept as a file of the Company for ten years.”

By Order of the Board ofCHINA SOUTHERN AIRLINES COMPANY LIMITED

Xie Bing and Liu WeiJoint Company Secretaries

NOTICE OF EGM

– 66 –

Guangzhou, the People’s Republic of China11 November 2013

As at the date of this notice, the Directors include Si Xian Min, Wang Quan Hua, YuanXin An and Yang Li Hua as non-executive Directors; Tan Wan Geng, Zhang Zi Fang, Xu JieBo and Li Shao Bin as executive Directors; and Gong Hua Zhang, Wei Jin Cai, Ning XiangDong and Liu Chang Le as independent non-executive Directors.

Notes:

1. Persons who are entitled to attend the EGM

a. Holders of the H Shares and A Shares whose names appear on the register of holders of H Sharesand register of holders of A Shares of the Company respectively, at the close of trading in theafternoon of Monday, 25 November 2013 (“Eligible Shareholders”) or their representatives areentitled to attend the EGM after completion of the required registration procedures in accordancewith Note 2 “Registration procedures for attending the EGM”. Holders of A Shares shall receive anotice separately.

b. The Directors, Supervisors and senior management of the Company.

c. Representatives of the professional advisers hired by the Company and special guests invited by theBoard.

2. Registration procedures for attending the EGM

a. Eligible Shareholders who intend to attend the EGM either in person or by proxy must deliver to theCompany on or before Friday, 6 December 2013, in person or by post at the registration address ofthe Company, or by fax at (+86) 20-8665 9040, the reply slip, which is attached to the notices of theEGM as Attachment A.

b. When attending the EGM, individual Eligible Shareholder or his/her proxy shall bring along his/heridentity card. The legal representative of a corporate Eligible Shareholder attending the EGM shallbring along his/her identity card, together with a notarised copy of the resolution or power ofattorney issued by the board of directors or other governing body of the corporate EligibleShareholder to appoint such legal representative to attend the meeting.

c. Holders of H Shares who intend to attend the EGM must deliver their instruments of transfer togetherwith the relevant share certificates to Hong Kong Registrars Limited, the registrar of H Shares, atShops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, at or before4:30 p.m. on Monday, 25 November 2013.

d. 26 November to 26 December 2013 (both days inclusive), during which period no transfer of HShares will be registered.

3. Proxies

a. An Eligible Shareholder has the right to appoint one or more proxies to attend the EGM and vote onhis/her behalf. A proxy does not need to be a Shareholder. A proxy of a shareholder who hasappointed more than one proxy may only vote on a poll.

b. A proxy must be appointed by an Eligible Shareholder or his/her attorney by way of a form of proxyfor the EGM, which is attached to the notice of EGM as Attachment B. If the proxy is appointed bythe attorney of an Eligible Shareholder, the power of attorney or other authorisation document(s)authorizing such attorney to appoint the proxy must be notarised.

NOTICE OF EGM

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c. To be valid, for holders of A Shares, the notarially certified power of attorney, or other document ofauthorisation, and the form of proxy must be delivered to the registered address of the Company nolater than 24 hours before the time appointed for the holding of the EGM. To be valid, for holders ofH Shares, the notarised power of attorney or other authorisation document(s), together with thecompleted form of proxy for the EGM, must be lodged with Hong Kong Registrars Limited withinthe same period of time.

4. Miscellaneous

a. The EGM is expected to last for not more than one day. Eligible Shareholders (or their proxies) whoattend shall bear their own travelling and accommodation expenses.

b. The address of the headquarter of the Company is:

1st Floor, No. 278 Ji Chang RoadGuangzhou 510405, Guangdong ProvincePeople’s Republic of ChinaTelephone No.: (+86) 20-8612 4462Facsimile No.: (+86) 20-8665 9040Website: www.csair.comContact person: Mao Lixing

c. Pursuant to Rule 13.39(4) of the Listing Rules, any vote of the shareholders at a general meetingmust be taken by poll. Therefore, all resolutions proposed at the EGM shall be voted by poll.

NOTICE OF EGM

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